The German Federal Government has given an important insight to its plans and future measures regarding taxation of the start-up- and VC-ecosystem in Germany by official answer to a parliamentary request by several members of parliament. These plans are not only important for young companies and their investors, but also for Germany's attractiveness as a start-up destination itself. This is especially true considering that Berlin is becoming Europe's top start-up destination and the call for governmental support for the German start-up scene increased recently.
One encouraging trend set out in the Government's recent statements is the announced tax exemption of the so-called INVEST-Subsidy for Venture Capital (INVEST – Zuschuss für Wagniskapital). Under this program, business angels get 20 percent of their investment reimbursed from a special governmental fund if certain conditions are met. Whereas currently such subsidy triggers German income tax, in the future its incentive effect as a tax-exempt gain will be much higher. Another positive highlight is that the government announced to adhere to the concept of a lower taxation of "carried interest" received by VC-fund initiators (40% exemption from income tax).
Unfortunately, the government refuses to introduce a tax exemption for capital gains received by the disposition of shares in qualified startup businesses, which would be somehow comparable with certain tax incentives in the UK and USA (tax roll-over). The group of parliamentarians also asked the government about other important issues, such as the call for VAT exemption for VC fund management fees, the idea to privilege a start-up by extending the offsetting of profit against tax loss carry-forwards and suggestions for a definite fiscal transparency of VC funds. Unfortunately the answers to these queries remained evasive.
Overall, as far as the INVEST-Subsidy is concerned, an encouraging step into the right direction has been announced. In addition that gives rise to hope for the ongoing effort of the German government to support the start-up and VC scene in Germany and especially Berlin.
This is an update to Europe's Incubator Central.
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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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