The Federal Ministry for Economic Affairs and Climate Action is committed to improving and supplementing the methodology used in its regulatory impact assessment in order to consider and reduce bureaucracy costs from the outset. In addition to this, it has also established projects to simplify these costs and has introduced targeted legislative measures to reduce the bureaucratic burden on a permanent basis.

Further development of the regulatory impact assessment

The ‘brake on bureaucracy’

A 'brake on bureaucracy' (PDF, 145 KB), a rule that the Federal Government has imposed on itself in a political commitment to limit the regulatory burden on businesses in an effective way, has been in force since 1 January 2015. Under this rule, any additional regulatory burden imposed on companies must be fully offset within a year, meaning that the burden on business must be eased elsewhere. The aim of this ‘one in, one out’ rule is to permanently limit the increase in burdens without hindering any measures that the government desires to implement.

Exceptions are only provided for projects that

• directly implement EU requirements, international treaties, case law of the Federal Constitutional Court (Bundesvefassungsgericht – BVerfG) and the European Court of Justice (ECJ), or
• serve to avert considerable dangers, or
• are temporary (maximum of 1 year).

The 2018 Annual Report on Better Regulation (in German) shows that the ‘brake on bureaucracy’ is working. In the years 2015 to 2018, the compliance burden for the economy was reduced by around 2 billion euros. New burdens imposed in 2018 amounted to €76 million, compared with relief totalling €205 billion.

Guidelines for the SME Test

The Federal Government’s Guidelines for the SME Test serve to standardise the so-called SME Test and to ensure that it is systematic. They support the federal ministries responsible for setting legislation by helping them to examine possible regulatory alternatives at an early stage in the legislative process and to map out the consequences of a legislative project for SMEs. This helps the ministries to sharpen their understanding of the specific costs that a particular piece of legislation would generate for small and medium-sized enterprises. The aim is to prevent bureaucratic burdens from being imposed on SMEs wherever possible. The guidelines are partly based on the results of a study commissioned by the Federal Ministry for Economic Affairs and Climate Action entitled ‘Berücksichtigung von KMU-Belangen in der Gesetzesfolgenabschätzung’ (Considering the interests of SME in regulatory impact assessments). The application of the Guidelines for the SME Test (German version (PDF, 74 KB)), (English version (PDF, 74 KB)) has been mandatory since 1 January 2016.

Simplifying business start-ups

In order to investigate how business start-ups can be simplified, a project entitled ‘Compliance costs for new business start-ups – from the business idea to initial turnover’ was undertaken. The project focused on looking at the typical administrative burden along the start-up process, from the business idea to initial turnover. It showed that start-up entrepreneurs want more transparency and better access to support services. In addition, it was also identified that the compliance burden can be significantly reduced by installing points of single contact, bundling administrative process steps and using digital communication, especially by reducing travel and waiting times. The project report can be found here.

Key component of business-friendly administration: network of points of single contact

The points of single contact (PSCs) were set up as part of the EU Services Directive to support companies doing business in the EU internal market and at home. In addition to personal contact persons, e-government portals in particular provide a central access point to information on administrative requirements and the relevant administrative procedures in the destination country. When fully developed, they enable businesses to complete all of the formalities required electronically. As procedures are bundled together, it will be possible to pre-complete forms with standing data and to use documents multiple times. For companies, this means that the effort and costs involved in procuring information will be lower, and that the administrative authorities will be relieved of having to provide routine information. Find out more here (PDF, 359 KB).

Further development of electronic invoicing for business: e-invoicing ordinance and ZUGFeRD 2.0

On 6 September 2017, the Federal Government adopted the Ordinance on electronic invoicing in federal public procurement (E-Rechnungs-Verordnung – E-Rech-VO) (PDF, 4 MB). The ordinance implements EU Directive 2014/55 EU on electronic invoicing in public procurement.

Under the e-invoicing ordinance, companies that have been awarded a public contract or concession submit invoices electronically. Public contracting authorities of the supreme federal authorities were thus obliged to accept and process electronically submitted invoices that comply with the new EU standard as of 27 November 2018. Since 27 November 2019, all other federal authorities have been obliged to accept and process electronic invoices. From this date, all businesses are provided with the assurance that their electronic invoices will be accepted by federal authorities, as long as they comply with the EU standard. Up to 26 November 2020, businesses remained free to choose whether they sent their invoices in electronic or in paper form. Following this date, they can only submit their invoices electronically, with a few exceptions.

In this context, it is important to note that according to the requirements of the e-invoicing ordinance, data exchange standards that are already established in the economy, such as ZUGFeRD, are also able to be used as an equal alternative to the XInvoice data exchange standard if they are – like ZUGFeRD 2.0 – CEN-compliant. Find out more (in German).

The First Bureaucracy Reduction Act

The First Bureaucracy Reduction Act (in German) (PDF, 146 KB) aimed at a quick and palpable reduction of the burden on companies, particularly start-ups and young, fast-growing firms. In particular, more small businesses were exempted from accounting and record-keeping obligations to a greater extent than before, and start-ups were not required to provide economic statistics as early. For the first time, this is also being piloted for parts of the environmental statistics. The thresholds that apply for the intra-Community statistics are also being raised. The energy sector has also seen red tape cut in numerous ways, as has tax law. Overall, the private sector has had its administrative burden reduced by roughly €704 million per year.

The Second Bureaucracy Reduction Act (BEG II)

The measures under the Second Bureaucracy Reduction Act, adopted on 5 July 2017, ease the administrative burden felt by small firms, particularly those with only two or three employees, as are typically found in the skilled-crafts sector. The main focus of the legislation is to eliminate red tape in tax law and to promote the use of digital technology – the use of digital technology both in administrative procedures and also in the skilled-crafts sector (modernising the Crafts Code). The Second Bureaucracy Reduction Act enhances the notion of points of single contact and promotes eGovernment, for instance by ensuring that uniform information on laws and ordinances is made available on internet platforms. In addition, the calculation of social security contributions is simplified. Overall, the private sector has seen its administrative burden reduced by at least €135 million per year.

The Third Bureaucracy Reduction Act (BEG III)

The Third Bureaucracy Reduction Act (in German), which was passed by the Federal Cabinet on 18 September 2019, represents a first important step towards implementing the SME strategy. It reduces the burden on companies by more than €1.1 billion a year – time and money which will now be available for them to devote to their real work.

The Act makes use of the opportunities of digitisation to cut out much of the paperwork in many areas. Key elements include the introduction of the electronic incapacity for work notification, improved rules for the retention of tax-related data processing systems, and digital alternatives to paper-based registration forms in hotels. Also, people starting out in business will only need to submit their advance VAT return once a quarter – rather than once a month. This implements an important promise from the Coalition Agreement.

In addition, the BEG III provides for other important measures, including raising the threshold for turnover tax for small businesses from €17,500 to €22,000, raising the threshold for flat-rate wage taxation in the case of short-term employment, and flat-rate taxation for employees who only have limited tax liability.

In addition to this, there are plans to introduce a base register in conjunction with a uniform business identification number system. This represents a major step forward in the modernisation of the registry system, which can lead to further significant relief for our companies.

Introduction of an Ordinance on applications for business licences

With the adoption of the Ordinance on applications for business licences of 22 July 2014, the then Federal Ministry of Economics and Technology (BMWK) created the legal basis for a system enabling business registration data to be forwarded electronically across administrative authorities without media discontinuity, on the basis of the ‘XGewerbeanzeige’ standard. Since 1 January 2017, the forwarding of such data to a total of nine authorised agencies has been carried out exclusively electronically using the "XGewerbeanzeige" standard. Further information can be found here (in German).

Reform of public procurement law: reduced cost and effort for companies

The comprehensive reform of public procurement in April 2016 modernised public procurement and strengthened digitalisation. The Rules of Procedure Governing Supply and Service Contracts Below the EU Thresholds (PDF, 935 KB) came into force for the Federal Government on 2 September 2017. The introduction of greater flexibility, e.g. in negotiations between contracting authorities and bidders, and the fact that the process largely takes place online, has facilitated the procurement process and made life easier for the participating companies. Further information can be found here (in German).

Competition Register: Information for contracting authorities

Within the award procedure, public contracting authorities must check whether any grounds for exclusion apply to bidding companies due to previous economic offences. The Competition Register relieves the burden on companies because they no longer have to submit any documents when they apply for public contracts. At the same time, the burden on the administrative authorities will be reduced because they can retrieve the information from the Competition Register centrally and completely digitally. Further information can be found here (in German).

REFIT

Better regulation and cutting red tape are a top priority for European-level institutions. In launching its REFIT programme, the European Commission has followed a holistic approach designed to reduce the administrative burden resulting from EU legislation and to do this across all Member States. The objective of the programme is to systematically and regularly review EU legislation and to look for ways of streamlining it, in order to ease the burden on business, especially SMEs. Ultimately, the process is to ensure that European legislation is efficient and powerful, that it helps reduce costs and generates growth and employment.

REFIT platform

The European Commission has established a REFIT platform that serves as a forum for dialogue with the Member States and other stakeholders. It is made up of two groups. These are the Government Group that brings together representatives of the 28 Member States (represented for Germany by the Federal Ministry for Economic Affairs and Climate Action), and the Stakeholder Group, which consists of 18 high-ranking representatives of business, civil society and the social partners, one representative of the Committee of the Regions, and one of the European Economic and Social Committee.

The most important task of the REFIT platform is to assess specific proposals for streamlining regulation which have been submitted by citizens or stakeholders either by post or via the 'Lighten the load - Have your say!' online portal. In its assessment, the platform looks at whether these proposals would be effective in cutting red tape and whether this can be achieved without compromising on the intended effects of the relevant EU rules. The REFIT platform then submits its proposals to the Secretariat-General of the European Commission, which has committed to responding to these proposals by either implementing them or by issuing a public statement on why it rejects the proposal.

EU SME monitor organised by the Federal Ministry for Economic Affairs and Climate Action

European regulation is having an ever greater impact on German SMEs and their business. This is why it is in these firms' best interest to become actively involved in the shaping of EU initiatives. However, many small companies do not have the capacity to seek out detailed information about such initiatives at an early stage.

The Federal Ministry for Economic Affairs and Climate Action and its EU SME monitor can help. The EU SME monitor provides SMEs with up-to-date information on EU initiatives that are relevant for them, and gives them access to public consultations held by the European Commission. Thanks to the monitor, SMEs have a chance to learn about relevant EU proposals at a very stage and can make their interests heard.

The EU SME monitor is organised by the Federal Ministry for Economic Affairs and Climate Action to ensure that German companies can have a say on important European regulatory initiatives.