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Upper house of parliament does not approve draft business tax reform bill
Bill is forwarded to conference committee of the upper and lower houses of parliament to find a compromise
On 24 November 2023, the upper house of the German parliament withheld its approval to the business tax reform bill (“Growth Opportunity Act”) that was approved by the lower house of parliament on 17 November 2023 (see GTLN dated 11/22/23) and forwarded the tax reform bill to the conference committee of the upper and lower houses of parliament for further consideration and to find a compromise. The pending tax reform bill includes a multitude of tax measures covering tax incentives, corporate income tax, individual income tax, and other tax law provisions. Key measures contained in the bill are the introduction of a climate investment grant and changes to the net operating loss (NOL) carryback period, the minimum taxation rules for the use of NOL carryforwards, and the interest deduction limitation rules.
The upper house of parliament did not criticize specific measures in the bill in its session on 24 November 2023 but rather the financial burden that would be imposed on the federal states and local municipalities as a result of the bill. It also expressed disapproval that the federal government did not sufficiently include the federal states in the legislative process.
The bill will now be considered by the conference committee to find a compromise that would be acceptable to both chambers. It is currently unclear whether it will be possible to reach agreement before the last session of the upper and lower houses of parliament in 2023 on 15 December, or whether discussions will continue into 2024. Based on a 15 November 2023 decision of the federal constitutional court that a reallocation by the federal government of EUR 60 billion in unused debt unlocked during the COVID-19 pandemic to fund its green transition project violates constitutional principles, there is significant budget pressure that may limit the room for negotiations between the two chambers.