German cabinet agrees draft law to bolster startups

The plans are part of the government’s efforts to revive Europe’s biggest economy after two years of contraction

Germany’s cabinet on Wednesday agreed a draft law to improve financial conditions for small businesses and startups, as well as a tax break for commuters and restaurants.

More capital was also to be directed into infrastructure projects and renewable energy, the draft law seen by Reuters showed.

The plans are part of the government’s efforts to revive Europe’s biggest economy after two years of contraction.

Young, innovative companies are an engine for investment, growth and good jobs, German Finance Minister Lars Klingbeil said, adding that the law created better financing conditions for smaller companies and startups.

Around four times as much has been invested in startups in the U.S. as in Germany since the beginning of 2023, said Germany’s startup association, which welcomed the new law.

The tax framework for VC will be revised to support startups and initial public offerings, the draft law said.

The minimum nominal value of shares will be cut to one cent from the current one euro to align with international standards, while some audit, reporting and notification requirements will be abolished.

The cabinet also gave the green light to a tax amendment bill that will expand the commuter allowance to 38 cents per km from 30-38 cents currently, and cut value-added tax next year on food in restaurants to 7% from 19%.

Germany’s DEHOGA hotel and restaurant association welcomed the decision.

Whether and to what extent price reductions are possible depends largely on how costs continue to develop, said DEHOGA head Ingrid Hartges, noting the increase of the minimum wage and rises in food, beverage and energy prices.

According to the draft, the measures would lead to tax revenue shortfalls of €4.8 billion ($5.6 billion) in 2026.

For the years 2027 to 2030, annual shortfalls of between €5.7 billion and €6.1 billion were expected.