The Federal Government set out as a coalition for progress to modernise Germany, make the country fit for the future and set the course for a climate-neutral economy. In order to secure prosperity and stability for future generations, Germany needs a strong economy.

Federal Government embarks on growth offensive

Speaking on the sidelines of the cabinet retreat in Meseberg, Federal Chancellor Scholz emphasised that Germany was an economically strong country with sound prospects. But there was also an awareness of where the challenges currently lay, he noted. For this reason, said Scholz, it was crucial for the Federal Government to launch an offensive to stimulate growth in Germany.

He sees the newly proposed Growth Opportunities Act as being at the centre of this undertaking: “We’ll also be applying tax measures to help ensure that investments are made now and not postponed.”

Strengthening the competitiveness of Germany as a business hub

By means of new legislation to strengthen growth opportunities, investments and innovations, while at the same time simplifying the tax system and making it fairer, the Federal Cabinet is putting forward adjustments that involve numerous individual regulations concerning the whole range of taxation law for consultation in parliament. The aim is to advance Germany further along the path to a climate-neutral economy and strengthen the country’s competitiveness as a business hub. All in all, the Growth Opportunities Act will offer annual relief potential for the economy of some seven billion euros (full annual effectiveness) up until 2028.

“The Growth Opportunities Act is a vital building block to fully tap our economy’s turnaround potential. This is not a broad-based economic stimulus package. We have to provide fresh momentum to activate the strengths that already exist in the economy,” said Federal Finance Minister Christian Lindner.

Investment premium and strengthening of tax incentives for research

One key project is the introduction of an investment premium to promote the transformation of the economy. This will apply to energy efficiency measures, thereby improving the conditions for businesses by offering tax incentives for investments in clean and climate-friendly technologies. The result will be enhanced productivity and climate protection. Specifically, the Federal Government will subsidise 15 percent of companies’ expenditure on energy efficiency measures by way of direct financial support.

The law will also provide an additional fiscal stimulus to boost research. After all, Germany can only secure its prosperity by means of future-ready processes and innovative products. In addition to personnel costs, material costs are to be funded in the future as well. What is more, the maximum tax assessment basis is to be tripled, thereby increasing subsidies, too. And for small and medium-sized enterprises, the subsidy rate is to increase from 25 to 35 percent.

Modernisation of tax legislation

The tax system as a whole is to be simplified and modernised based on changes at key points. Other contributing measures under the Growth Opportunities Act include the following:

1. Temporary reintroduction of declining depreciation for movable assets acquired on or after 1.10.2023.
2. Temporary introduction of declining depreciation for residential buildings at a rate of six percent from 1.10.2023.
3. Improvement of tax loss deduction.
4. Introduction of an interest rate cap.
5. Reporting obligation for national fiscal structures.
6. Increased limit on low-value assets to 1,000 euros.
7. Introduction of a legal regulation on the mandatory use of electronic invoices between domestic companies.

The Growth Opportunities Act is part of a 10-point plan for Germany as a business hub which the Federal Government presented on the sidelines of its cabinet retreat in Meseberg.