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Simplification of tax rules for many taxpayers

A tax amendment act that came into force on 9.6.2021 will make life simpler for many taxpayers and provide improved possibilities for deductions.

The legislation in question is the new Act on the Modernisation of Withholding Tax Relief (Abzugsteuerentlastungsmodernisierungsgesetz, AbzStEntModG). Most of the changes concern capital gains tax relief for taxpayers with restricted tax liability (cf. this article). Besides concentrating the refunding procedures at the German Federal Central Tax Office, from 2024 onwards there are plans for fully digitalised processing of applications. Refund applications for taxpayers with restricted tax liability would then be submitted electronically and refund certificates would likewise be provided electronically. The following changes, in particular, were also introduced in the AbzStEntModG:

  • The applicable period for the tax exemption of Coronavirus special payments up to an amount of € 1,500 has been extended to 31.3.2022 and this is why employers now have more time to make special payments to their employees.
  • As of 2021, when the child allowance is transferred then this will always also result in the allowance for the care and educational or professional training needs of a child being transferred, too. 
  • Evidence of a degree of disability of below 50 may continue to be provided by presenting a pension approval certificate or another certificate that provides proof of regular payments.
  • If the revenues of a commercial operator or a land farmer and forest manager exceed the revenue threshold of € 600,000 then the German Fiscal Code provides for a requirement to keep accounts. In future, revenues will be calculated on the basis of the rules for determining overall revenues when applying the small business exemption.  
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