Tax incentives for investing in the future in the form of climate change investment premiums and research grants

On 30 August, the bill for the Growth Opportunities Act (Wachstumschancengesetz) was passed by the Federal Cabinet. Among other things, it includes a draft Act on Tax Incentives for Investments in Climate Change (Climate Change Investment Premium Act [KlimaInvPG]) as well as changes to the Research Grants Act (FZulG). Read about the main innovations here:

The Climate Change Investment Premium Act

The Climate Change Investment Premium Act (Klimaschutz-Investitionsprämiengesetz) regulates the granting of investment premiums with the objective of advancing the transformation of the economy towards more protection for the climate. Those who are entitled to investment premiums are taxpayers (incl. partnerships opting to be taxed like corporations under section 1a of the Corporation Tax Act (Körperschaftsteuergesetz – KStG) to the extent that they have any taxable income, as well as co-entrepreneurships (Mitunternehmerschaften).

Investments may benefit if they include subsidisable expenses of at least 5,000 euro. These include expenses for the acquisition or production of a new finite-lived movable fixed asset. This also applies to measures involving an existing finite-lived movable fixed asset if they subsequently result in acquisition or production costs.

The condition for being eligible for the premium is that the acquisition, production or measure:

• Is included in a savings plan drawn up by a recognised energy consultant that meets the essential requirements of an energy audit under DIN EN 16247-1 as defined by section 8a of the Energy Services Act [EDL-G]
• Improves the company’s energy efficiency and thus exceeds applicable Union standards or Union standards that have been adopted but are not yet in force if the investment is carried out and completed 18 months before the standard came into force at the latest and
• It is used exclusively or nearly exclusively for company purposes in the year of acquisition, production or when the measure was carried out and in the following financial year at a domestic permanent establishment belonging to the entitled party.

Exceptions to this are expenses for installations for cogeneration, district heating or district cooling or energy plants that run on fossil fuels. The subsidised period begins when the law is promulgated – on 31 December 2023 at the earliest – and ends on 31 December 2030. An important condition for this is certification by the recognised energy consultant mentioned above. If the company concerned has an energy or environmental management system certified under DIN EN ISO 50001 or EMAS, however, the company’s own energy manager may draw up the savings plan.

Every entitled entity may make a maximum of four applications for an investment premium within the application period (from 31/12/2024 until 01/01/2032). An investment premium may be granted alongside other government subsidies or grants but only one subsidy is possible per investment. The assessment basis in the application period must be at least 10,000 euro, and may amount to a maximum of 200 million euro per entitled party. The investment premium amounts to 15 per cent of the assessment basis, meaning that a maximum premium of 30 million euro is possible within the total period.

The Research Grant Act

Furthermore, with regard to research grants, the Growth Opportunities Act (Wachstumschancengesetz) provides for an initial tax incentive for tangible investments. This is to be achieved by expanding the tax assessment basis of research grants to include the depreciation of finite-lived movable assets used in benefited research and development projects. The condition for this is that they must have been acquired or produced after 31/12/2023 and are necessary to perform the research and development project. That the asset is necessary for the research project is to be confirmed by the Research Grant Certification Body (Bescheinigungsstelle Forschungszulage).

Furthermore, the subsidy rate at which the remuneration for the project is included in the subsidisable tax assessment basis will be increased from the current 60 per cent to 70 per cent if the project is commissioned after 31/12/2023. The Act also provides for tripling the maximum tax assessment basis to 12 million euro in future from 01/01/2024. The subsidy rate for this is 25 per cent as a rule, which means that starting from the coming year a total subsidy of three million euro can be achieved (currently one million euro). Finally, the Growth Opportunities Act provides that research grants for small and medium-sized enterprises will be increased from 25 per cent of the tax assessment basis to 35 per cent in future.   

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