The Federal Ministry of Finance carried the relevant case law into its administrative guidance by circular of 3 March 2026 (III C 3-S 7117-e/00003/005/058). For company car arrangements within Germany this changes little: the authorities state expressly that existing practice may in principle be retained and that the amendments are made by way of addition and clarification. The position is different as soon as the employee’s residence and the employer’s seat lie in different countries.

Everything turns on one question: for consideration or not?

There are two possible treatments. If the employee provides consideration in return for the vehicle, the arrangement is a letting for consideration. Without consideration, it may instead be a deemed supply under § 3 Abs. 9a Nr. 1 UStG, the German VAT Act, provided the vehicle gave rise to a full or partial input VAT deduction.

The distinction governs more than whether VAT arises at all. In a cross-border employment relationship it also decides which country collects it. A deemed supply is taxed where the business is established. A supply for consideration, by contrast, follows the rules on the hiring of means of transport, and those point to an entirely different address.

What the Court of Justice held, and what the BFH made of it

In Finanzamt Saarbrücken (judgment of 20 January 2021, C-288/19) the Court of Justice of the European Union held that making a vehicle available to an employee is not a supply of services for consideration where the employee makes no payment, uses no part of their cash remuneration for it, and does not forgo another benefit under an agreement between the parties. Merely permitting private use is therefore not enough.

The Bundesfinanzhof, Germany’s Federal Fiscal Court, then took a narrower view (judgment of 30 June 2022, V R 25/21). Where private use is individually agreed in the employment contract and is actually taken up, the direct link required between the vehicle and the work performed is present. The arrangement is then treated as a barter-like transaction under § 3 Abs. 12 Satz 2 UStG: the consideration consists of part of the work performed.

The circular of 3 March 2026 carried that line into the German VAT application decree, the „Umsatzsteuer-Anwendungserlass“: the question of consideration is now dealt with in section 15.23 para. 9, the place of supply in section 3a.5 para. 4. A written clause is not essential. Under the sentence newly inserted there, the necessary connection will as a rule also exist where the provision rests on oral arrangements or on other circumstances of the employment relationship, such as established company practice.

The Bundesfinanzhof sees no conflict with the Court of Justice in this. The Luxembourg judgment answered only the question referred by the tax court, and that question had left the barter-like transaction unmentioned.

The consequence: the place of supply moves to the residence

A supply for consideration is, for VAT purposes, the hiring of a means of transport. Once it runs for more than 30 days without interruption, it ceases to be short-term under § 3a Abs. 3 Nr. 2 Satz 2 Buchstabe b UStG. For long-term hiring to a customer who is not a taxable person, sentence 3 of the same provision fixes the place of supply: it is made where the customer has their residence or seat.

A company car is almost always made available for longer than 30 days. The employee’s place of residence is therefore the decisive connecting factor. Neither the employer’s seat nor the place where the work is actually done changes that.

Employee resident in Germany, employer established abroad

This is the situation the case law revolves around. Before the Bundesfinanzhof, the employer was a Luxembourg public limited company with no fixed establishment in Germany; both of its employees lived here. The outcome: the arrangement was taxable in Germany.

For a company without a German seat, this creates an obligation that its own law gives no reason to expect. It owes German VAT without holding an establishment here, and it has to declare it. If you employ staff in Germany and provide them with vehicles, examine this question independently of how the matter is treated in your country of establishment.

Employee resident abroad, employer established in Germany

In the other direction, the supply moves out of Germany. Where a German company provides a cross-border commuter resident in a neighbouring country with a company car on a lasting basis, the supply is not taxable in Germany on the German view, but in the country of residence.

That is not relief, it is a shift. The filing obligation then arises there, and whether that country also classifies the arrangement as a letting for consideration is a matter for its own law. This check belongs at the outset, not in the middle of an audit.

Where two countries classify differently

Whether a vehicle arrangement is made for consideration is not answered uniformly across Europe. Several tax authorities require an expressly agreed consideration more strictly than German practice has done since the March 2026 circular. Two classifications can then sit side by side: in Germany a letting for consideration at the employee’s residence, in the country of establishment a deemed supply at the company’s seat.

A double charge becomes possible, though it is not automatic. The decided case shows how little the German charge depends on the treatment elsewhere: in Luxembourg the arrangement was neither taxed nor accompanied by an input VAT deduction. German liability arose all the same. What matters is the contractual terms, the practice actually followed in the business, and the input VAT position.

Measuring: value of the consideration or costs incurred

Once it is settled that German VAT is due, the taxable amount follows the route by which the arrangement was classified. Where the provision is treated as a supply for consideration in the form of a barter-like transaction, § 10 Abs. 2 Satz 2 UStG treats the value of each supply as the consideration for the other. What is measured is therefore the value of the proportionate work the employee performs in return for the use. The VAT itself does not form part of the consideration.

Where there is no consideration and the provision is a deemed supply free of charge, § 10 Abs. 4 Satz 1 Nr. 2 UStG applies instead: the taxable amount is the costs incurred in making the supply, to the extent that they gave rise to full or partial input VAT deduction. That includes the acquisition cost of the vehicle, provided it is allocated to the business. From 500 euros upwards, that cost is spread evenly over the adjustment period under § 15a UStG, which is five years for a vehicle.

Where the place of supply lies in the employee’s country of residence, the taxable amount is governed by the law of that country as well. The two German provisions apply only to the extent that the transaction is taxable in Germany.

Declaring: registration or One-Stop Shop

Where VAT is due in another Member State, you can either declare it there or use the One-Stop Shop. § 18j Abs. 1 Nr. 2 UStG covers, for taxable persons established in the Union, services supplied to customers within the meaning of § 3a Abs. 5 Satz 1 UStG in another Member State. The reference is to the category of customer and not to the narrower list in sentence 2, so the long-term hiring of a vehicle to an employee falls within it.

Participation is optional, but once chosen it applies to all covered supplies. Input VAT cannot be recovered through this route; the refund procedure remains available for that. For a company with only a handful of vehicles abroad, the One-Stop Shop is usually the leaner option, because it avoids a separate registration in the country of residence.

The concession ended on 30 June 2026

The principles set out in the circular apply to all open cases. A time-limited concession existed only for supplies carried out up to 30 June 2026: where a vehicle was exceptionally provided without consideration, the earlier administrative position on the place of supply could still be applied. For all later supplies, the new position governs.

A further case is pending

A further case is pending before the Bundesfinanzhof under file number V R 42/25, on appeal from the Finanzgericht Rheinland-Pfalz (judgment of 27 June 2024, 6 K 1073/22). The question is whether, and on what conditions, the provision of company vehicles to employees resident in Germany by a company established in another EU country is to be treated as a taxable supply for consideration in Germany.

Until a decision is handed down, the administrative position remains authoritative. By documenting the affected cases carefully and keeping the assessments open procedurally, you retain the option of benefiting from a later ruling.

What to check now

• Record the residences. Where do the employees live who are allowed to use a vehicle privately?
• Review the arrangements. Is private use set out in the employment contract, agreed orally, or established through company practice?
• Identify the consideration. Does the employee pay anything, give up salary, or forgo another identifiable benefit?
• Clarify the input VAT. Was VAT deducted on purchase or on the lease payments? Without consideration, that is what determines whether a taxable supply arises at all.
• Measure the duration. Does the arrangement run for more than 30 days without interruption?
• Determine the taxable amount. Is it the value of the proportionate work, or, where the vehicle is provided free of charge, the total of the costs that gave rise to input VAT deduction?
• Check the obligations in the other country. Is there a registration or filing requirement, and is the One-Stop Shop an option?
• Look back at earlier periods. Supplies carried out from 1 July 2026 onwards no longer fall under the concession.

The ongoing recording of such transactions forms part of German Accounting & Reporting; the filings and correspondence with the tax office belong to German Tax & Compliance. How cross-border employment is handled in payroll is set out under German Payroll & HR.

Sources: §§ 3 Abs. 9a and Abs. 12, 3a Abs. 3 Nr. 2 and Abs. 5, 10 Abs. 2 and Abs. 4, 15a, 18j UStG; CJEU, judgment of 20 January 2021, C-288/19 (Finanzamt Saarbrücken); BFH, judgment of 30 June 2022, V R 25/21; BFH, pending case V R 42/25; circular of the German Federal Ministry of Finance of 3 March 2026, III C 3-S 7117-e/00003/005/058, on the provision of vehicles to employees; sections 3a.5 para. 4 and 15.23 para. 9 UStAE.

When registration becomes mandatory

A VAT registration in Germany is not triggered by turnover but by an event. The two cases that matter most in practice:

Stock held in Germany. As soon as a company holds goods in a German warehouse and sells from there, an obligation to register arises — regardless of turnover and regardless of whether the warehouse is operated by the company itself or provided by a service provider. A marketplace operator’s fulfilment centre counts just as much as your own.

Distance sales to German private customers. Where a company supplies private individuals in Germany from another EU state, the place of supply shifts to Germany once the EU-wide distance selling threshold of EUR 10,000 is exceeded. A German registration or participation in the One Stop Shop is then required.

The most common misconception: the EUR 10,000 threshold does not apply to everyone

In practice the distance selling threshold is regularly applied to companies it does not cover at all.

§ 3c Abs. 4 UStG requires the supplier to have its seat, its management or a permanent establishment in only one member state. A company established in a third country has none of these in any member state and therefore does not meet that condition.

The consequence: for a company from the United Kingdom, Switzerland, the United States or China there is no de minimis threshold. The turnover is taxable in the country of destination from the first euro. A third-country business relying on the EUR 10,000 registers too late.

How often returns are due: the thresholds since 2025

How often an advance VAT return has to be filed depends on the previous year’s tax. Those thresholds were raised on 1 January 2025.

The earlier figures of EUR 7,500 and EUR 1,000 still appear in numerous publications online. They have been out of date since the beginning of 2025.

What changes on 1 January 2027

Here lies the real news for companies planning a registration.

Under § 18 Abs. 2 Satz 4 UStG a company starting a new activity has to file monthly in the current and the following calendar year. That rule is suspended by § 18 Abs. 2 Satz 6 UStG for the assessment periods from 2021 to 2026.

During the suspension, the filing frequency for a new company follows the expected tax for the current year, that is the figure given in the tax registration questionnaire. A company expecting low turnover can therefore file quarterly from the outset.

As things stand the suspension ends with the close of 2026. Unless the legislator extends it, the basic rule applies again from 2027: two years of monthly returns for every new registration, whatever the level of turnover.

The difference between four and twelve returns a year is considerable over two years — in effort and in the scope for error. Anyone planning a registration in any event should check the state of the legislation again in the autumn of 2026; an extension of the suspension is possible.

Late filing penalty: the 10 per cent cap no longer exists

Another point where out-of-date information persists. Numerous sources refer to a cap on the late filing penalty of 10 per cent of the tax assessed. That wording comes from § 152 AO as it stood before the 2019 reform and is no longer the law.

For the advance VAT return the position today is:

• § 152 Abs. 1 AO: for a tax return of the self-assessment type — and an advance return is one — imposing the penalty is at the tax office’s discretion. The mandatory imposition under paragraph 2 concerns only returns relating to a calendar year or to a date laid down by law.
• § 152 Abs. 5 Satz 1 AO: 0.25 per cent of the tax assessed for each month begun, but at least EUR 10 for each month begun.
• § 152 Abs. 10 AO: the penalty may not exceed EUR 25,000.

The monthly minimum is the point that surprises in practice: where the tax due is small, it is not the percentage that governs but the number of months begun.

For the annual VAT return the minimum is higher — § 152 Abs. 5 Satz 2 AO sets EUR 25 for each month begun. The two amounts are frequently confused.

What comes with it in practice

Registration is only the beginning. What follows is the ongoing obligation: advance returns at the frequency set, the annual return, where applicable the EC Sales List, and all the correspondence with the competent tax office. For foreign companies the obstacle is rarely the tax itself but the language and the procedure: communication with the tax office is in German and, in large part, still by post.

That is exactly where our tax work for foreign companies comes in — registration, advance returns, deadlines and the correspondence with the authorities, conducted in German and reported in French or English.

For companies that need German VAT alone and want the handling in English, we run a separate offering with Vaytax — with the tax expertise in house. A detailed account of the registration procedure, including the documents required depending on the country of establishment, can be found under VAT registration for foreign companies (in German).

Three points to take away

• The obligation to register arises from the warehouse or the distance sale, not from a turnover limit.
• The EUR 10,000 distance selling threshold is not open to third-country businesses. For them, taxation in the country of destination applies from the first supply.
• The suspension of the two-year monthly filing rule for new registrations expires at the end of 2026 as things stand. Anyone registering in 2027 should plan for monthly returns.

Law as at August 2026.

What changes

The Ninth Act amending provisions of tax advisory law and tax law of 29 June 2026 (BGBl. 2026 I Nr. 197) introduces a nationwide minimum multiplier of 280% for trade tax in § 16 Abs. 4 GewStG.

The new rule applies for the first time to the 2027 assessment period.

How the minimum multiplier works out

Trade tax is calculated as follows:

Trade tax = trade income × 3.5% base rate × multiplier

An example shows the effect:

In municipalities that have so far applied a multiplier below 280%, the minimum burden rises by up to 40% on the calculation.

Who is particularly affected?

The new rule affects above all:

• companies in municipalities with low multipliers so far — often structurally weaker or rural areas that have used low rates to attract businesses.
• companies whose choice of location has been motivated in part by tax, particularly in classic trade tax structures using municipalities with low multipliers.

What companies should do now

Where clients have permanent establishments in municipalities with low multipliers, we recommend examining the effect on their tax burden from 2027 early. That applies in particular in liquidity and tax planning and where decisions on location are pending.

Existing structures built around the municipal multiplier should also be reviewed, since the tax advantage will be considerably smaller from 2027 or will disappear entirely in some cases.

We are glad to discuss with you individually how the new rule affects your company and what action follows from it.

Source: Ninth Act amending provisions of tax advisory law and tax law of 29 June 2026, BGBl. 2026 I Nr. 197 (§ 16 Abs. 4 GewStG).

Why this matters in practice

In investment projects, advance payments are no exception. With more complex procurement, technical plant or projects planned over the long term, the question regularly arises of when the input VAT on an invoice can be claimed.

The BFH has now made clear that input VAT can in principle be deducted from an advance payment invoice — even where the supply itself has not been performed at the time of payment.

The case decided

In the case decided, the claimant took part in an investment model in photovoltaics. The installation was first to be acquired and then leased to a third party.

The installation had not been delivered at the time of payment. The claimant nevertheless deducted the input VAT on the advance payments made.

The tax office refused the deduction, on the ground that the supply had not yet been performed and that the claimant had not yet obtained the power of disposal over the photovoltaic installation.

The BFH’s decision

The BFH confirmed that input VAT on an advance payment invoice can in principle be deducted before the supply is performed.

Particularly relevant in practice: an invoice does not have to be described expressly as an “advance payment”, “prepayment” or “interim invoice”. What matters is not the particular wording but the recognisable content of the invoice.

It has to be apparent from the invoice that it relates to a supply still to be performed.

What the invoice has to contain

The requirements for a proper invoice apply in principle to advance payment invoices as well. The invoice therefore has to contain the relevant mandatory details.

An expected date of supply does not have to be stated, however.

All that has to be stated is the date on which the consideration is received, where that is already fixed and differs from the invoice date.

Where the supply does not materialise

The input VAT deduction is in principle preserved where, at the time of payment, the recipient was entitled to assume in good faith that the supply would be performed.

What counts is therefore the position at the time of the advance payment — not developments afterwards alone.

What companies should keep in mind

Companies should continue to check and document advance payment invoices carefully. It is particularly important that:

• all the mandatory details of a proper invoice are present,
• the invoice can be related unambiguously to a supply still to be performed,
• the payment is documented in a way that can be followed,
• the underlying supply relationship can be evidenced soundly.

Where this leaves us

The decision strengthens legal certainty on the input VAT deduction from advance payment invoices. It makes clear that formal wording alone is not decisive.

In practice that means the absence of an express reference such as “advance payment” or “prepayment” does not automatically cost the input VAT deduction, where the character of the invoice follows from its content.

Companies should nevertheless see to clean invoice verification, complete documentation and contractual foundations that can be followed — particularly on larger investment projects and more complex supply relationships.

Germany is thereby responding to the reality of international billing systems (ERP), standardised group invoices and cross-border supply relationships — and reducing a common practical risk to the input VAT deduction.

Where the friction was

Invoices still have to meet the formal requirements of § 14/§ 14a UStG and of Article 226 of the VAT Directive. In practice, however, exact German wording was long insisted on for the notes that matter most in an audit — above all for:

• reverse charge cases (where the recipient accounts for the tax)
• self-billing
• the margin scheme (for travel services, second-hand goods, works of art, collectors’ items and antiques, for instance)

With international invoice layouts in particular, that regularly led to translation errors, inconsistencies between countries and, in the worst case, formal objections in audits.

What the BMF now makes clear

The BMF makes clear that for certain invoice details, wording customary in other official EU languages for the corresponding details under Article 226 of the VAT Directive may be used in place of German terms. The UStAE has also been extended by an annex listing the permissible terms.

• The principles apply to all open cases.
• An additional German translation is in principle not required for the terms set out in the list, provided the detail is clear and correct.

Permissible terms in practice

Who benefits

For companies operating internationally the clarification is an operational gain — particularly for:

• foreign companies invoicing in Germany
• e-commerce arrangements and platform models (the OSS environment included)
• multinational groups with English-language ERP standards
• cross-border B2B services and intra-Community supplies
• companies applying the margin scheme or other special arrangements

In concrete terms that means:

• fewer translation and formatting errors in sensitive mandatory details
• better system compatibility (ERP and e-invoicing templates)
• a lower risk of invoice corrections and process loops

Where the limits are

The new openness on language is not a free pass. The input VAT deduction still depends on an invoice that is correct in form and in substance. Risks arise in particular where:

• a term does not come from the permissible list or is ambiguous
• the VAT treatment is applied incorrectly (reverse charge without the conditions being met, for instance)
• other mandatory details are missing or the evidence is inadequate

In short: a foreign language is permissible — substantive accuracy remains essential.

Checklist for finance, accounting and ERP

• Review invoice templates: where are the reverse charge, self-billing and margin notes output?
• Tie the list of terms to the UStAE annex (no “free” translations).
• Harmonise ERP rules (tax codes, country logic, text blocks) consistently.
• Strengthen master data governance (customer/supplier, place of supply, VAT ID, type of supply).
• Define review paths: who decides in special cases, who documents the VAT treatment?

Companies with activities in Germany need to be particularly attentive in managing their VAT: current figures from the German tax authorities show that in 2024 alone special VAT audits led to additional tax of EUR 1.63 billion.

What a special VAT audit is

Where a tax office suspects that a company is not accounting for its VAT properly, it can order a special VAT audit — a targeted examination confined to VAT.

Unlike a general tax audit, this measure is faster and more focused, and it can affect companies of any size and in any sector.

The purpose of these audits is to identify irregularities or errors in the advance VAT returns early on — in particular:

• input VAT deducted without entitlement
• turnover not declared, or declared incorrectly
• invoices that are incorrect or incomplete

The figures for 2024

The official figures from the German tax authorities speak plainly:

• 733 special audits were carried out in 2024
• 630 auditors were deployed — an average of 39 audits each
• each auditor produced additional tax of EUR 1 million on average
• EUR 1.63 billion in additional tax was assessed in total

What does that mean in practice? These amounts do not come from penalties but from VAT assessed after the event because of errors or omissions found in the companies’ returns.

The most common causes

• errors in charging VAT or in deducting input VAT
• missing or inadequate evidence
• formal defects in invoices (missing mandatory details, format problems)
• incorrect treatment of cross-border supplies (intra-Community supplies, exports and so on)

Who is particularly affected

These developments concern above all:

• French companies with a subsidiary, a permanent establishment or taxable activity in Germany
• companies liable to VAT in Germany (in e-commerce, for instance, or in cross-border services or supplies within the EU)

What the risks are in practice

• substantial back payments of tax (VAT plus interest)
• refusal of the input VAT deduction where invoices are defective
• criminal exposure where tax evasion is suspected — including in cases of negligence

Recommended measures

We strongly advise the companies concerned to take the following steps:

• review the German VAT returns internally
• check the invoicing (mandatory details, cross-border situations, exemptions and so on)
• introduce regular internal controls, particularly on the accuracy of the amounts declared
• reconcile the accounting records with the advance VAT returns
• archive all vouchers and supporting evidence properly

The measures adopted are intended to take effect not only nationally but in the German-French context as well — particularly for companies operating across borders that invest, carry out research or pursue electric mobility strategies in both countries.

The measures in detail

Declining-balance depreciation for movable assets (§ 7 Abs. 2 EStG)

As a cyclical “investment booster”, declining-balance depreciation is reintroduced for investments from 1 July 2025 to the end of 2027. Companies may claim up to 30% of the acquisition cost per year. This applies to all movable fixed assets, whatever the purpose of the investment, and not only to equipment. The rule is deliberately temporary, in order to stimulate investment decisions in the short term.

Corporate income tax reduced in stages (§ 23 Abs. 1 KStG)

A central signal to corporations: from 2028 the corporate income tax rate falls in six annual steps from the present 15% to 10% in 2032. The aim is to improve the tax burden on German companies significantly by international comparison, for instance against France (corporate income tax including surcharges currently around 25–26%). Accompanying adjustments to the rules on withholding tax on investment income are planned.

Reduced rate on retained profits (§ 34a EStG)

For sole traders and partners the rate on retained profits falls in stages to 25% from the 2032 assessment period. This is intended to bring partnerships and corporations closer together for tax purposes and to create incentives for reinvestment in the business.

New depreciation for electric vehicles (§ 7 Abs. 2a EStG)

For newly acquired pure electric vehicles an arithmetic-degressive depreciation is introduced — among other things 5% in each of the two following years.

These rules apply to acquisitions between July 2025 and December 2027. They are particularly relevant for companies with cross-border fleet structures and sustainability targets.

Higher gross list price limit for electric company cars (§ 6 EStG)

For the flat-rate taxation of company cars (the 1% rule) and for the logbook method, the price ceiling for qualifying electric vehicles rises from EUR 70,000 to EUR 100,000. That widens the range of vehicles that are attractive for tax purposes considerably, particularly in the upper end of electric mobility.

Wider tax support for research (§ 3 FZulG)

The maximum assessment base for the research allowance rises from 2026 from EUR 10 million to EUR 12 million a year. In addition, overheads and other operating costs will be taken into account at a flat rate of 20% of qualifying expenditure — including in contract research. For sole traders and partners the qualifying hourly rate rises from EUR 70 to EUR 100.

What it means for German-French structures

The tax reforms now adopted are to be understood not only as a national stimulus measure but also as a strategy for strengthening German competitiveness in the European single market. For German-French corporate structures — subsidiaries, permanent establishments or bilateral research partnerships — several advantages follow:

• Planning certainty for investment through clearly dated transitional rules and staged rates
• Germany’s tax attractiveness compared with France and other EU states, particularly through the corporate tax cut and support for electric mobility
• More room for innovation in cross-border R&D projects through the wider research allowance
• Support for sustainable mobility — electric company cars with favourable tax treatment can be registered and used in France as well

According to the Bundesrat and the federal government the tax reforms together amount to relief of around EUR 46 billion up to 2029 — a substantial economic policy measure that also creates relevant options for multinational companies with a German-French dimension.

The programme is intended to give companies planning certainty through tax relief, to stimulate investment and so to support growth and new jobs over the long term. Across the funding period from 2025 to 2029 the tax concessions come to around EUR 46 billion (source: the federal government).

The core elements of the package

Investment booster (declining-balance depreciation)

From 1 July 2025 companies can depreciate capital assets on a declining-balance basis at 30% (maximum 30% per year), running until 31 December 2027. Faster tax relief in the year of acquisition is meant to ease the pressure on investment.

Lower corporate income tax

From 2028 the rate falls in stages from 15% to 10% by 2032 — bringing the overall burden to around 25%.

Preferential treatment of retained profits

Profits that are not distributed will in future be taxed at 25% instead of 28.25%, in three stages between 2028 and 2032.

Investment incentive for electric mobility

For newly acquired electric vehicles between 30 June 2025 and 31 December 2027 a depreciation rate of 75% applies in the first year, with reduced rates in stages thereafter. At the same time the gross list price limit for electric company cars rises to EUR 100,000.

Support for research

The research allowance increases, overheads and operating costs are supported at a flat rate of 20%, and the cap rises from EUR 10 million to EUR 12 million (2026–2030).

Where the legislation stands

• The Bundestag gave its approval on 26 June 2025.
• The final decision of the Bundesrat is scheduled for 11 July 2025.

Compensation for the Länder and municipalities: the federal states (North Rhine-Westphalia among them) are calling for compensation for lost revenue — the Bundesrat will take up the law on 11 July 2025; Baden-Württemberg, North Rhine-Westphalia and others are invoking the connexity principle.

What this means for German-French companies

• Tax attractiveness: improved depreciation options and lower corporate income tax rates make Germany more competitive for companies — including by comparison with France.
• Support for climate-friendly investment: the electric mobility boost strengthens sustainability in companies operating across borders.
• Support for research: the higher R&D allowances benefit binational projects as well.
• Legal certainty: a clearly defined programme with a start and an end date helps with strategic planning.

This immediate investment programme marks the first step in a series of planned measures to support growth and future viability — nationally as well as within German-French business networks. Monitoring and evaluation will show how strong the impulses turn out to be and how the Länder and municipalities are compensated where revenue is needed.

This article sets out the key changes brought by the Wachstumschancengesetz.

1. Private use of electric vehicles

The ceiling on the gross list price for the private use of company electric vehicles rises from EUR 60,000 to EUR 70,000.

For electric vehicles with no CO2 emissions (fuel cell vehicles included), only a quarter of the assessment base has to be applied under the 1% rule and under the logbook method — until now only up to a gross list price of EUR 60,000.

To promote sustainable mobility and to reflect higher purchase prices, the ceiling rises to EUR 70,000. This applies to vehicles made available to employees as well, and to electric cars acquired after 31 December 2023.

2. Gifts to non-employees

From 2024, higher amounts may be spent on gifts to clients or business partners. The threshold for deductible gifts to non-employees rises from EUR 35 to EUR 50.

This applies to financial years beginning on or after 1 January 2024.

3. Declining-balance depreciation

Declining-balance depreciation is reintroduced for a limited period.

Declining-balance depreciation for movable assets was introduced on 1 January 2020 by the Second Corona Tax Assistance Act and extended to 31 December 2022.

In view of the current situation, declining-balance depreciation may also be used for assets acquired or produced between 31 March 2024 and 1 January 2025. The rate applied may not exceed twice the straight-line annual rate and is capped at 20%.

4. Cross-border financing arrangements

New rules for cross-border financing arrangements and financing services in the Foreign Tax Act replace the interest rate ceiling that has been removed (§ 1 Abs. 3d and 3e AStG).

The adjustments are intended to curb profit-shifting strategies and to define the arm’s length principle more clearly, so that profits are taxed where they arise. International groups are to be prevented from deducting interest expenses through cross-border financing and thereby reducing their taxable base. Strict requirements apply to loan interest, which has to withstand an arm’s length comparison, and the debtor has to be able to demonstrate credibly that the loan will be repaid.

This applies from the 2024 assessment period.

5. E-invoicing from 2025

From 2025, e-invoicing becomes mandatory and forms the basis for the future transaction-based reporting of B2B turnover to a nationwide reporting system.

Only invoices in a structured electronic format meeting the requirements of Directive 2014/55/EU count as electronic invoices. Other formats and paper invoices are referred to as “other invoices”.

The rules set out when e-invoices are mandatory and when other invoices remain permissible. For small-value invoices within the meaning of § 33 UStDV and for travel tickets within the meaning of § 34 UStDV, any type of invoice may still be used. For turnover between 1 January 2025 and 31 December 2026, other invoices may be issued instead of e-invoices with the recipient’s consent.

For companies with turnover of up to EUR 800,000 in the previous year, that exception runs until 31 December 2027. Electronic formats may be agreed where they meet the requirements of the European standard (EN 16931). The EDI procedure can be used on those terms after 2027 as well.

This applies from 1 January 2025.