1. Update in Mandatory Electronic Invoicing.
2. Gastronomy from 1st January, 2024: VAT Rate jumps back to 19%.
3. Private use benefit from company cars: Changing the calculation method can save taxes.
4. Due to increase in the annual income threshold as of 1st January, 2024: Reassess public health insurance obligation.
5. Low-value assets.
6. Special depreciation according to Section 7g Individual Tax Law.
- Update in Mandatory Electronic Invoicing
The Growth Opportunities Act anchors the regulations for the introduction of electronic invoicing for domestic B2B transactions in the VAT Act. Even before the parliamentary legislative process was finalized, the Federal Ministry of Finance (BMF) issued initial information on the requirements for electronic invoices. It was questionable whether the already known formats XRech- nung and ZUGFeRD fulfil the planned requirements. The German Association of Tax Consultants (DStV) has now provided information on the BMF’s draft letter in this regard.
According to the current state of affairs, an electronic invoice should be an invoice that is issued, transmitted and received in a structured electronic format and enables electronic processing. It must comply with the European standard for electronic invoicing and the list of corresponding syntaxes.
The BMF clarifies that both an invoice in accordance with the familiar XStan-dard and in ZUGFeRD format from version 2.0.1 generally represents an invoice in a structured electronic format that fulfils the planned requirements. According to the association, this is important information for practitioners and increases planning security.
The BMF also comments on the use of the EDI procedure: a solution is currently being worked on to ensure that the EDI procedure can continue to be used under the future legal framework. However, the need for technical adaptations cannot be ruled out, efforts are being made to limit the conversion effort to what is necessary.
According to the government draft, a staggered transitional regulation for the obligation to issue an electronic invoice is planned. However, the BMF points out as a precautionary measure that from 1st January, 2025, all businesses will be obliged to accept electronic invoices.
- Gastronomy from 1st January, 2024: VAT Rate jumps back to 19%
In order to support the catering industry during the coronavirus pandemic, the legislator reduced the VAT rate on restaurant and catering services (except for drinks) from 19% to 7% on 1 July, 2020. The regulation expired on 31 December, 2023 and was not extended.
- Private use benefit from company cars: Changing the calculation method can save taxes.
At the beginning of each year, employees with a company car can decide how the non-cash benefit for private use should be calculated – as a lump sum or based on actual use. They can also change the chosen calculation method retrospectively in their income tax return for the year in question. This step is often worthwhile if, for example, they are better off for tax purposes with the logbook than with the flat-rate calculation due to a small number of recorded private journeys. If they want to switch from the flat rate to actual use, they must keep a logbook with complete documentation of all journeys throughout the year.
A company car that can also be used for private purposes, is considered to be a money-saving vehicle for tax purposes.
The amount of the benefit may be calculated using the 1% method if the car is used more than 50% for business purposes. In this case, employees must pay a flat rate of 1% of the gross price of the new car each month (0.25% for electric cars up to €60,000). In addition, 0.03% is added for each kilometer travelled between home and primary place of work or – if the primary place of work is only visited occasionally – 0.002% for each kilometer multiplied by the number of journeys to the primary place of work. This flat-rate benefit calculation does not require individual records of the journeys actually made.
Alternatively, employees can calculate the benefit in money’s worth on the basis of a mileage report. This usually makes sense if the vehicle is not driven much privately, but the employee uses it a lot for work-related reasons. All journeys must be recorded in the logbook, both business and private journeys. Income tax must then be paid pro rata for the private journeys.
Please Note: The logbook is particularly worthwhile if the total costs for the company car are low. If, for example, the car has already been written off or is a used car, a logbook should definitely be kept during the year for tax reasons.
- Due to increase in the annual income threshold as of 1st January, 2024: Reassess public health insurance obligation.
The annual social insurance rates will be adjusted (in rotation) on 1st January, 2024. Employers must check annually whether employees who were previously exempt from public health insurance are now subject to compulsory public insurance or whether compulsory insurance may end. The treatment in payroll accounting would then have to be changed.
Background
The annual earnings limit (JAEG) or “compulsory insurance limit” is the limit above which employees cease to be subject to compulsory insurance in statutory health and long-term care insurance (Section 6 (1) No. 1 of the German Social Code (SGB) V). At the turn of the year, employers must therefore check with foresight whether changed insurance amounts and upcoming changes in remuneration will lead to a new assessment under the insurance law. In this case, the modalities for calculating social security contributions via payroll accounting must be checked and employees must be informed of the change so that they can take out voluntary statutory or private health and long-term care insurance if they are no longer required to do so. Of course, the reverse can also be the case, where the increase means that the compulsory limit is no longer exceeded and insurance is therefore compulsory.
New values from 1st January, 2024
The Federal Cabinet approved the new social insurance calculation figures on 11 October, 2023. Subject to the pending approval of the Bundesrat (was planned for 24 November, 2023), the JAEG will be uniform for all federal states annually from 1st January, 2024 as EUR 69,300 instead of EUR 66,600 in 2023.
For employees who were already insured in private health insurance on 1st January, 2002, the special JAEG of EUR 62,100 applies instead of the general JAEG (instead of EUR 59,850 in 2023).
Please Note:
Privately insured employees who become subject to compulsory insurance again due to the increase in the JAEG, can apply for exemption from the statutory insurance obligation (§ 8 Para. 1 SGB V). In addition, people who fulfil the following three requirements (§ 6 Para. 3a SGB V) are not subject to compulsory insurance even if they fall below the JAEG:
- They have reached the age of 55,
- They were not legally insured in the last five years before becoming subject to compulsory insurance and were exempt from compulsory insurance for at least half of this time,
- They were exempt from compulsory insurance or not subject to compulsory insurance due to a main occupation as a self-employed person.
Determination of the relevant remuneration
The insurance obligation can only be assessed if the relevant “regular” annual salary is known. This includes all income that constitutes remuneration within the meaning of social insurance (Section 14 (1) SGB IV) and is almost certainly paid at least once a year.
Practical Tip:
The GKV-Spitzenverband has published “Basic information: Insurance exemption for employees who exceed the annual earnings limit from 20 March, 2019”. This contains information on how to determine the relevant regular annual salary as well as the consequences of the start or end of the exemption from insurance and the possibility of exemption from the insurance obligation.
- Low-value assets
Currently, the acquisition or production costs of depreciable fixed assets that are capable of independent use are fully deductible as operating expenses in the year of acquisition or production if the expenses for the asset do not exceed EUR 800.
According to the planned new regulation, the value is to be raised from EUR 800 to EUR 1,000.
Please Note: Alternatively, a compound item can be recognized in the financial year of acquisition or production if the acquisition or production costs for the individual asset exceed EUR 250 but not EUR 1,000. The depreciation of that compound item must be recognized in the financial year when it is acquired or produced and in the following four financial years, depreciation is equally recognized. The following is planned here: The increase of the amount limit from EUR 1,000 to EUR 5,000 and the reduction of the dissolution period to three years.
- Special depreciation according to Section 7g Individual Tax Law
The special depreciation allowance for depreciable fixed assets currently amounts to up to 20 % of the investment costs (Section 7g (5) Individual tax law). It applies to businesses that do not exceed the profit limit of EUR 200,000 in the year preceding the investment.
Please Note: Special depreciation can be claimed independently of the utilization of an investment deduction and can be spread over the year of acquisition or prediction and the following four years as required.
The special depreciation allowance is now to be increased to up to 50 %, which will promote faster refinancing.
Disclaimer: All views expressed in this article are solely for informational purposes and should not be construed as legal advice. This information is for reference only and is bound to change in case of any amendments or changes to applicable laws. We do not assume any responsibility or liability for any errors or omissions in the content of this article, and do not make any warranties about the completeness, reliability and accuracy of the information expressed in this article.
