Germany | Employment Tax | “Future Financing Act”

20 September 2023                                                                                                                     

Employment Tax

Germany | “Future Financing Act”

Impact : Medium

Summary

On 16 August 2023, the Federal Cabinet approved the government draft for a so-called “Future Financing Act”. The changes are to come into force from 2024.

The Detail

Among other things, the change in employee profit-sharing is planned. The annual tax-free allowance for gratuitous or discounted employee shareholdings from the employer to employees for qualifying plans is to be increased from currently EUR 1,440 to EUR 5,000.

Employee shareholdings in the context of deferred compensation are only tax-free up to the amount of EUR 2,000. If the monetary benefit exceeds EUR 2,000, the profit-sharing is only tax-free if it is granted in addition to the salary owed anyway.

Furthermore, a mitigation of the problem is foreseen that in the case of a taxable benefit-in-kind by transferring a shareholding to employees without liquid funds having accrued to them, this leads to the tax burden exceeding the net salary (so-called dry-income). However, these regulations only apply to companies of a certain size.

• The taxation of the benefit in kind is to take place only (at the latest) 20 years instead of previously twelve years after the transfer of the profit-sharing.
• For the facts “expiry of 20 years” and “termination of employment”, no taxation is to take place if the employer voluntarily and irrevocably declares that he bears the liability for the wage tax to be withheld and paid. In these cases, taxation is only to be triggered by the subsequent fact of “sale”. In this case, it should not be possible to make a declaration exempting the employer from liability and a claim for liability by the tax office at the place of business should then no longer require a further discretionary examination.
• In the case of reacquisition of shares upon leaving the enterprise, only the remuneration actually paid to the employees shall be decisive.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Anna Liepelt, Senior Manager | anna.l.liepelt@vialto.com

Further information on Vialto Partners can be found here: www.vialtopartners.com

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Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

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Further information on Vialto Partners can be found here: www.vialtopartners.com

Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

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