Government bill on the Budget Accompanying Act 2025 published

The government's draft bill for the 2025 Budget Accompanying Act was published in mid-May. Selected relevant topics are presented below in an overview. Final enactment remains to be seen.

Tightening of land transfer tax on "share deals"

The criteria for land transfer tax relating to changes in shareholders or the consolidation and transfer of shares are to be expanded in order to better capture large-scale property transactions in the form of "share deals" (i.e. transfers of shares in partnerships and companies that own land). In future, there is to be de facto parity between asset deals and share deals in property transactions. A change in shareholders triggering land transfer tax is now deemed to occur if at least 75 % (instead of 95 %) of the shares in the partnership’s assets or in the company are transferred to new partners within a period of 7 years. In future, the scope of application will cover not only changes in partnership interests in partnerships but also in limited companies. Corporations traded on stock exchanges are exempt. Furthermore, transfers of shares in the company’s assets or of the company itself are to be subject to land transfer tax, provided that, as a result of the transfer (directly or indirectly), at least 75 % (instead of 95 %) of all shares are consolidated in the hands of a single person or a group of persons. The term ‘group of persons’ is generally to be understood in the sense of a group under company law. Natural persons who exercise unified management or a controlling influence are also to be covered. The criterion of a concentration of shares is to take precedence over that of a change of shareholders.

The basis for assessing real estate transfer tax in the event of a change of shareholders, the consolidation or transfer of shares, and in the case of reorganisations shall continue to be the value of the property – the tax rate remains at 0.5 % (this also applies in the case of a family group within the meaning of the GGG). If, however, a "property company" is involved, the fair market value of all the properties concerned (in the case of a consolidation of shares, a change of shareholders or a reorganisation) shall constitute the basis of assessment for the real estate transfer tax (tax rate 3.5 %). A "property company" is deemed to exist, in particular, where the assets consist predominantly of land that is not used for the company’s own commercial purposes (the sale, letting or management of land does not constitute commercial use) or where the income is derived predominantly from the sale, letting or the management of land. The amendments to the Real Estate Transfer Tax outlined above are, in principle, due to come into force on 1 July 2025 and are to apply to acquisitions for which the tax liability arises or would arise after 30 June 2025.

Development surcharge on the sale of land

The rezoning of land – particularly from grassland to building land – can often result in atypical increases in value, which are now to be subject to higher taxation. Specifically, a 30 %iger rezoning surcharge is to be introduced on the sale of rezoned land, which is to be added to the calculated profit or positive income (surplus) (the rezoning surcharge therefore applies to both business and non-business income). If the sale of the land results in a loss, no rezoning surcharge is payable. A key aspect of the new regulation is that the rezoning surcharge applies only to land, and not to the proportionate capital gain on buildings erected after rezoning. Whether the property constitutes existing or new assets is irrelevant for the purposes of the rezoning surcharge; the tax rate applicable at the time of sale (standard tax rate or special tax rate) is also irrelevant. The rezoning surcharge is to be capped at the amount of the capital gains. The rezoning surcharge applies to disposals of land from 1 July 2025 onwards, provided that the rezoning took effect on or after 1 January 2025.

Increase in commuter allowance

To at least partially compensate for the abolition of the climate bonus, the commuter euro will be increased from €2 to €6 from 2026. The maximum reimbursement amount for employees entitled to the commuter allowance will be increased from the current €608 to €737 (and will be further increased for 2026 as part of the inflation adjustment in 2025).

Tightening of regulations for foundations

From 1 January 2026, the tax rate on donations to private foundations (foundation transfer tax) is to be increased from 2.5 % to 3.5 %. The "foundation privilege" in the form of the option to transfer hidden reserves (pursuant to Section 13(4) of the Corporation Tax Act) is to remain unaffected by this.

No revaluation of family benefits

In the interest of budget consolidation, the indexing of certain family benefits is to be suspended for the years 2026 and 2027 – for example, the child tax credit is not to be increased for 2026 and 2027. Furthermore, it is planned that for the calendar years 2026 to 2029, the compensation for bracket creep will only be made to the extent of 2/3 of the positive inflation rate; the remaining third is to be suspended.

Expansion of the flat-rate basis

For the 2025 and 2026 tax years, the basic flat-rate scheme is to be extended – specifically, for 2025, the turnover threshold is to be raised from €220,000 to €320,000, and the percentage for flat-rate business expenses from 12 % to 13.5 %. From the 2026 tax assessment onwards, there are even plans to raise the turnover threshold to €420,000 – the flat-rate business expenses are then to be increased to 15 %. In the case of the reduced flat-rate percentage of 6 %, for example for writing, lecturing, academic, teaching or educational activities, the turnover threshold of €420,000 is also set to apply from the 2026 tax assessment onwards (a maximum of €25,200 can therefore be claimed).

Under the flat-rate scheme for input VAT, the flat-rate input VAT amount remains at 1.8 % of the total turnover from activities within the meaning of Sections 22 and 23 of the Income Tax Act (EStG). The maximum amount of deductible input tax is to be increased – due to the rise in the turnover thresholds for the basic flat-rate scheme under income tax law – to a maximum of €5,760 for 2025 and to a maximum of €7,560 from 2026 onwards.

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