Supply of capital
At present, the supply of capital to a corporation attracts capital duty of 1%. Shareholders wishing to strengthen the equity of a corporation (e.g. by way of capital injections) should wait until FY 2016, since the supply of capital does not attract capital duty as of January 1st, 2016.
Increase of research premium
The research premium is an actual payment by the tax office, that is credited to the tax account of the tax payer (rather than just a tax allowance). In order to boost science and research activity, the research premium is increased from 10% to 12% of all research and development expenses.
Real estate capital gains tax rate increases from 25 % to 30 %.
In future, if real estate is inherited, received gratuitously or transferred within the framework of a re-orginisation, the real estate transfer tax of 3.5% will then be calculated on the basis of the property value (Grundstückswert) and not on the basis of the property’s assessed value (which is usually far below market price) as it has been until now.
Moreover, real estate transfer tax (at a reduced rate of 0.5%) will already be levied if 95% of the shares in a real estate owning company are united or taken over by a single shareholder (presently, this tax is only attracted in the event that 100% of the shares are subject to a transaction).
Primacy of profit distributions over repayment of capital
As of 2016, shareholders in corporations may no longer choose to treat cash payouts either as profit distributions (taxable at 25%) or capital repayments (tax-neutral). Instead, it will only be possible to repay capital once any operational profits as well as all retained earnings have been distributed.
Reform of tax rate levels for individuals
As of 2016, a total of six tax rate levels will apply to the income of individuals, with the maximum tax rate increasing from 50% to 55% (income exceeding EUR 1 million).
Increased withholding tax
Withholding tax (Kapitalertragsteuer) will be raised from 25 % to 27.5 % for dividends, capital gains, contributions from a private foundation (Privatstiftung), investment fund income etc.. Savings interest, however, continues to be taxed at 25%.
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The recently enacted Tax Reform Act 2015/2016 is in essence a reform of tax rates. The fact that the legislative changes do not come into effect before 1 January 2016, gives multinationals and individuals the chance to optimise planned transactions. In the case of capital transactions and profit distributions, timing might impact the tax position. It is strongly recommended to analyse the impact of the impending legislative changes on a case-by-case basis, taking into account all aspects of the current and future tax regulations.
