Tax Simplification Act 2011 – small changes, small effect - Mazars - Germany

Just as the 2010 Tax Act has taken effect, the next reform package arrives: the Tax Simplification Act 2011. On 9 December, the CDU, CSU and FDP coalition committee agreed to a package of around 40 simplification measures. The federal government’s draft of the law was enacted by the cabinet on 2 February 2011. The law is to take effect on 1 January 2012.

Some of the measures, such as the increase of the employee’s standard allowance for business-related expenses, are intended to be retroactively effective as of 1 January 2011. The following is a summary of the significant changes.

Improvements for private individuals:

- Simplification of tax declaration obligations: Tax payers who are not self-employed only need to submit a tax declaration to the financial authorities every two years.

- Increase of the employee’s standard allowance for business-related expenses from EUR 920 to EUR 1,000.

- Simplified deductibility of childcare expenses: In the future, there is no longer a differentiation between private and work-related childcare expenses.

- Reduction of filing statuses for spouses.

Improvements for companies:

- Notification of international tax issues only once annually due within five months following year end. Auslandssachverhalten

- Declaration of termination in the case of termination of business or leasing of business: In the future, a business is considered to be continued until a termination of business is formally declared.

- Relief for electronic invoicing requirements: An invoice is considered electronic when sent via e-mail, EDI system, as PDF or text file, via computer fax or fax server (however not as normal fax) or via an exchange of data storage media.

- Obligatory fee for binding information: Introduction of a de minimus threshold of EUR 10,000

Furthermore, the coalition committee is working of further measures; however, no concrete legislation suggestions have been formulated. The primary goal is the simplification of corporate tax law which should be expressed in the form of a revision of the accounting of losses as well as the introduction of a modern group taxation system.