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Legal Developments and Reforms in Germany in 2014

Both businesses and individuals will have to deal with and adjust to a number of legal reforms and changes in 2014. In what follows, we identify some of the more important of these changes and their implications from a business perspective.

1. Revocation Rights (Widerrufsrecht):

From 13 June 2014, new regulations for the implementation of the EU Consumer Rights Directive 2011/83/EU will apply. The regulations for consumer agreements have been fundamentally revised, and will apply to both the mail order and retail business sectors. The comprehensive reforms relating to revocation rights will simplify mail order business matters. Thus, a 14-day revocation right will, for example, apply throughout Europe. In the case of certain information not being provided, or false information being provided, the revocation right will lapse after twelve months and fourteen days. Entrepreneurs will furthermore be able to require consumers to pay for the costs of returning goods after a right of withdrawal has been exercised, regardless of the value of such goods. Costs will accrue for the adaptation of information texts (Belehrungstexte) and revocation forms. Further regulations will deal with the duty to provide information, customer hotlines and specific modes of payment. With the exception of transactions concerning everyday matters, information duties will in future also apply to retail transaction agreements concluded with consumers.

2. Adjustment of Threshold Values for Public Tenders:

Since 1 January 2014, new threshold values apply to EU-wide tenders. Public supply and service contracts now have to be offered for tender throughout the EU if the contract volume equals or exceeds an amount of EUR 207,000 (up from EUR 200,000 on 31 December 2013), and in the utilities sector, the threshold value increased from EUR 400,000 to EUR 414,000. For construction contracts, the threshold value now lies at EUR 5,186,000 (up from EUR 5,000,000).

3. Unrestricted Free Movement of Workers:

Citizens from most Eastern European countries have been able to work in Germany without being required to hold a work permit since 1 May 2011. This did not apply to persons from Romania and Bulgaria. This regulation now no longer applies; since 1 January 2014, Romanian and Bulgarian citizens enjoy the same unrestricted freedom of movement as do the citizens of the other European countries. An exception does, however, still apply to the citizens of the most recent EU Member State, Croatia. According to a transitional provision, which will continue to apply until 30 June 2015, Croatian employees need to apply for and hold a work permit. In certain cases, however, access to the other EU Member States has already been simplified, e.g. in the case of skilled workers holding a university degree, or seasonal labourers working in specific sectors.

4. Minimum Wages payable for Temporary Employment (Zeitarbeit):

On 15 September 2013, the German temporary employment sector (Zeitarbeitsbranche) agreed on a new minimum wage for approximately 800,000 employees engaged in the sector. Consequently, wages rose by EUR 8.50 in West Germany on 1 January 2014 (constituting a 3.8% increase), and by EUR 7.86 in East Germany (constituting a 4.8% increase). A further wage adjustment by 3.5% in West Germany and 4.3% in East Germany will be implemented on 1 April 2015.

5. Wages for Short-term Work:

With the German "Erste Verordnung zur Änderung der Verordnung über die Bezugsdauer für das Kurzarbeitergeld" of 31 October 2013, the German Federal Ministry of Labour and Social Affairs confirmed that the period for which short-term wages can be paid is 12 months, and approved same until the end of 2014.

6. Travel Expenses:

The German "Gesetz zur Änderung und Vereinfachung der Unternehmensbesteuerung und des steuerlichen Reisekostenrechts", which can be roughly translated as 'Law to Amend and Simplify Company Taxation and Travel Expense Tax Laws', came into effect on 1 January 2014. For the first time in the history of income tax law, travel expenses are thus now being comprehensively legally regulated as regards taxation. The new law also contains new provisions relating to added costs for board and lodging, meals, overnight accommodation and for maintaining two households. Employers should note the new content delimitation of the so called "first place of employment" (erste Tätigkeitsstätte), which will replace the "regular place of employment" (regelmäßige Arbeitsstätte). The previous / current "regular place of employment" of many employees will now in many cases become a new "first place of employment". The place of employment of all persons engaged in external activities (Auswärtstätigkeit) thus far will therefore have to be verified again. Only a limited advertising expense deduction is applicable in respect of the first place of employment (payment of a fixed sum for distances travelled, no payments for board and lodging), as was the case in respect of regular places of employment thus far.

7. Increased Import Custom Duties:

Effective on 1 January 2014, custom duties advantages which previously applied to goods originating from numerous countries ceased to apply, given that these countries are no longer deemed to be developing countries. Instead, the standard customs duties of the EU now apply to these countries, which include the Gulf States (Bahrain, Qatar, Kuwait, Oman, Saudi-Arabia, and the United Arab Emirates), Libya, Argentina, Brazil, Uruguay, Belarus, Russia, Kazakhstan and Malaysia.

8. Energy Efficiency Regulation (Energieeinsparverordnung):

Amendments to the Energy Efficiency Regulation will enter into force on 1 May 2014. These will subject not only construction companies and property owners to new rules; sellers and lessors, too, will be affected, and will in future have to exhibit their energy certificates (Energieausweis) at the time of the viewing of their immovable property by potential buyers / lessees already. After an agreement has been concluded, the certificate (or at least a copy thereof) must be provided to the buyer or lessee immediately. The most important energy figures contained in the energy certificate must also be listed in any advertisements relating to the immovable property.

9. Flensburg Point System:

The changes to the point system in Flensburg
will not only affect individuals, but also the trucking trade and other persons travelling frequently for occupational reasons. From 1 May 2014 onwards, traffic violations will be categorised according to a three-point system. Violations such as driving through towns at excessive speeds will be penalised with one point, severe violations such as failing to stop at a red light will be penalised with two points, and especially severe violations such as driving under the influence, harassing motorists by travelling too closely behind same, or leaving an accident site without permission will be penalised with three points. Drivers' licenses will in future be withdrawn after 8 points have been accumulated.

10. Consumer Insolvencies - Speedier Release from Residual Debt:

Effective on 1 July 2014, consumers and insolvent founders of new businesses will in certain circumstances be able to rid themselves of their debts after three years already, instead of the previously applicable six years. According to the German "Gesetz zur Verkürzung des Restschuld-Befreiungsverfahrens", which can be roughly translated as 'Law to Shorten the Proceedings for being released from Residual Debt', debts will be waived after three years, if the debtor is able to pay at least 35% of all creditor claims as well as all procedural expenses within this period. A release from residual debt after five years is possible if the debtor can pay at least the procedural expenses of approximately EUR 1,500 to EUR 3,000. Failing this, the currently applicable six year duration remains applicable.

11. Last but not least:

The Coalition Agreement: According to the coalition agreement negotiated and concluded between Germany's CDU, CSU and SPD parties (the current German ruling coalition), the following laws have, amongst others, been planned for 2014:

  • Motor Vehicle Toll: It is intended that holders of motor vehicles not licensed in Germany should pay toll (road tax). The exact scope and content of a corresponding law is currently still unspecified and somewhat problematic, however, given that any form of discrimination against foreigners in this regard would contravene EU law.
  • Pensions: From 1 July 2014 onwards, persons who have been contributing to a pension fund for 45 years (including periods of unemployment) will be able to begin drawing their pensions without deductions upon completing their 63rd year. In addition, child-rearing periods dating back to pre-1992 are to be better taken into account.
  • Energy law: In order to grow and expand renewable energy forms, the amended Renewable Energies Act (Erneuerbare-Energien-Gesetz; EEG) is to come into effect in the summer of 2014. Similarly, the Combined Heat and Power Generation Act (Kraft-Wärme-Kopplungs-Gesetz; KWKG) is to be amended, and regulations are to be implemented in the field of network expansion and utilisation.
  • Prevention law: A prevention law, which is also intended to strengthen prevention and health support in businesses, is in the pipeline.

Barbara Mayer, Gundo Haacke

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