Update on the Growth Opportunities Act - The Climate Protection Investment Premium Act

On 17 November 2023, the Bundestag – the German parliament – passed the government draft of a law to strengthen growth opportunities, investment and innovation as well as tax simplification and tax fairness (Growth Opportunities Act).

Among other things, the Growth Opportunities Act will create a new law on tax incentives for investments in climate protection (KlimaInvPG). In addition, the existing funding instrument of the research allowance will be made more attractive.

With the introduction of the Climate Protection Investment Premium Act, the existing environmental and climate protection funding is to be expanded to include another new funding instrument. The climate protection investment premium is designed as a profit-independent tax premium.

Who is in scope?

All persons with limited or unlimited tax liability in Germany under the Income Tax Act or Corporation Tax Act with taxable (non-exempt) income in accordance with Section 2 paragraph 1 sentence 1 no. 1-3 of the Income Tax Act (EStG) are eligible. This only includes income from agriculture and forestry, commercial operations and self-employment. In the case of co-entrepreneurships, the co-entrepreneurship is the beneficiary.

Each beneficiary may submit a maximum of four applications for investment premiums in the period after 31 December 2024 and before 1 January 2032.

What is in scope?

• Investments must involve eligible expenditure of at least EUR 5,000 in order to be subsidised.

• Eligible expenses are the costs for the acquisition or production of a new depreciable movable fixed asset. In addition, the subsidy also applies to measures on an existing depreciable movable fixed asset if these lead to subsequent acquisition or production costs.

• Subsidised assets must be used exclusively or almost exclusively in a domestic permanent establishment in the year of acquisition or manufacture and in the following year (ie, there must be a domestic connection).

• The funding concept is open to all technologies. Funding is not limited to specific systems or technologies; rather, the decisive factor is proof of a contribution to climate protection.

Only assets that are subject to depreciation within the meaning of Section 7 EStG are eligible for subsidisation. Funding is only available for movable assets subject to capitalisation. Investments in immovable assets (buildings or similar), intangible assets and current assets are not eligible for funding, even if the conditions for funding are met.

The funding period begins on 1 March 2024 and generally ends on 31 December 2029. Investments are eligible for funding if they were started after the promulgation of the law and completed before 1 January 2030. The investment is deemed to have begun with the binding order of the asset or with the start of production of the asset.

Investments completed after 31 December 2029 are eligible if partial production costs were incurred before 1 January 2030 or advance payments on acquisition costs were made before 1 January 2030.

How is funding provided?

The investment - the acquisition, production or measure - must improve the company's energy efficiency in a qualified manner:

• the acquisition, production or measure is included in a savings concept that has been drawn up by an authorised energy consultant and meets the essential requirements for an energy audit, and

• the energy efficiency of the applicant's operational activities is improved
  • and applicable European Union standards are exceeded; or
  • European Union standards that have been adopted but have not yet entered into force are fulfilled, provided that the investment is carried out and completed no later than 18 months before the standard enters into force.

Investments for combined heat and power, district heating or district cooling as well as energy systems that run on fossil fuels are excluded from funding.

How much funding is available?

The investment premium can be granted alongside other state subsidies or grants, but only one subsidy per investment is possible. The assessment basis - the sum of the eligible expenses - must be at least EUR10,000 in the funding period and can amount to a maximum of EUR200 million per beneficiary. The investment premium that can be paid out amounts to 15% of the assessment basis, meaning that a maximum premium of EUR30 million per eligible person is possible in the overall funding period.

Where can I apply for funding?

The investment is only subsidised upon application to the tax office responsible for the taxpayer or, in the case of co-entrepreneurships, to the tax office responsible for the uniform and separate assessment.

The application can be submitted after the acquisition or production of the eligible assets at the earliest, after the entitlement has arisen. As the application procedure has to be completely restructured, it should be possible to submit an application from 1 January 2025 at the earliest. Applications can still be submitted after the expiry of the funding period until 31 December 2031.

The application must be submitted exclusively electronically in accordance with the officially prescribed data set. All eligibility requirements for the grant must be set out in the application. In particular, the application must include the energy-saving concept and written confirmation of the conformity of the energy-saving concept and the assets applied for as eligible assets by the commissioned energy consultant.

To conclude

Even though the legislative process has not yet been finalised, it makes sense to include the new funding instruments of the Climate Protection Investment Premium Act in longer-term planning. This applies because each eligible person can submit a maximum of four applications for investment premiums during the funding period and only one subsidy per investment is possible. The total funding amount is also capped.

Although it is foreseeable that further changes may be proposed in the parliamentary process in the coming weeks due to the Federal Council's appeal to the Mediation Committee, the climate protection premium is an important component of the federal government's future environmental and climate protection funding. Possible future changes could include, for example, limiting the eligible taxpayers in terms of their size or economic activity.

If you would like more information on the Growth Opportunities Act, we discuss the draft bill and updates here:

• The upcoming Growth Opportunities Act and VAT
• Mandatory e-invoicing for domestic B2B transactions in Germany now envisioned for 2026 onwards

DLA Piper's tax law team will be happy to answer any further questions you may have in this context.