Federal government plans tax advantages for employee share ownership

Not just working for the start-up, but having a direct share in its success: This possibility is provided for by a new draft bill of the German government, which wants to double the tax allowance for employee shareholdings and exempt them from taxes. There is also good news for venture capitalists: no more taxes on administrative costs.

According to a new draft bill, the German government wants to create new incentives for Germany as a start-up location. As of July 1, 2021, it wants to double the tax allowance for asset investments from 360 euros to 720 euros. In addition, the sales tax on the administrative costs of venture capital funds is to be abolished.

Start-ups are of "crucial importance" to the German economy, the draft bill, dated December 1, said. And highly skilled workers are critical to success, it said. In Silicon Valley, it has long been a successful strategy to recruit employees with profit-sharing schemes. Thanks to the new tax-free allowance, participation in one's own employer will now also become more attractive in Germany. Almost more importantly, employees previously had to pay tax on the increase in the value of their company shares every year. Now, income tax is only due on the date of sale or departure from the company. The president of the German Start-ups Association, Christian Miele, told Handelsblatt

The German government also wants to create an incentive for investors: Until now, venture capital funds in Germany have had to pay taxes on management costs. This does not apply to investment funds; with the new law, this tax exemption is also to apply to venture capital funds. The bill is currently going through the parliamentary process for a vote.