Tax Innovations in Germany
With the Act for an immediate tax investment programme to strengthen Germany as a business location (Investitionssofortprogramm 2025 - Immediate Investment Programme 2025), a tax relief package worth billions was implemented in the summer, which is intended to boost corporate investment in the short term and improve the attractiveness of Germany as a business location in the long term. Furthermore, it was intended to provide companies with planning certainty for the coming years. Selected measures – similarities to Austria can certainly be recognised – are presented below in an overview.
Declining balance depreciation up to 30 %
The reintroduction of declining-balance depreciation (AfA) for investments (made between 1 July 2025 and 31 December 2027) in movable fixed assets results in a declining-balance depreciation rate of up to 30 % per year (instead of straight-line depreciation). The 30 % applies in the year of acquisition or manufacture – in subsequent years, depreciation amounts to up to 30 % of the respective residual book value. Declining-balance depreciation is only permitted for movable depreciable fixed assets such as machinery and technical equipment, but not for buildings or intangible assets.
Promotion of electromobility
A special depreciation option is available for pure electric vehicles purchased new between 1 July 2025 and 31 December 2027. This arithmetic-declining depreciation with staggered depreciation rates over 6 years is as follows.
| Year | Depreciation rate in % of the acquisition cost |
|---|---|
| Year of acquisition | 75 % |
| Year 2 | 10 % |
| Year 3 | 5 % |
| Year 4 | 5 % |
| Year 5 | 3 % |
| Year 6 | 2 % |
The special tax incentive applies to all purely electrically powered vehicles in company assets (cars, electric commercial vehicles, lorries and buses) and is intended to provide an incentive for fleet electrification. Furthermore, there will be an improvement in the tax treatment of electric company cars in payroll accounting.
Phased reduction of the corporation tax rate
The current nominal corporation tax rate in Germany is 15%, although, when taking into account the solidarity surcharge of 5.5% and an average trade tax rate of 400%, the total tax burden amounts to just under 30%. The nominal corporation tax rate will be reduced and will develop over the coming years as shown in the table.
| Year | Corporation tax rate |
|---|---|
| By 2027 | 15 % |
| 2028 | 14 % |
| 2029 | 13 % |
| 2030 | 12 % |
| 2031 | 11 % |
| 2032 | 10 % |
Tax relief for retained earnings
Sole traders and partnerships have long been able to benefit from a reduced flat tax rate on retained (undistributed) profits – the retained earnings tax rate, which applies in place of the progressive tax scale, is currently 28.25%. The reduced income tax rate for retained profits is now – as shown in the table – linked to the gradual reduction in corporation tax in order to maintain tax neutrality between partnerships and limited companies.
| Year | Capital gains tax rate |
|---|---|
| By 2027 | 28.25 % |
| 2028 and 2029 | 27 % |
| 2030 and 2031 | 26 % |
| From 2032 | 25 % |
Research allowance - tax R&D support
To boost investment in research and development, the assessment basis for the research allowance will be increased from 1 January 2026. The maximum eligible expenditure per company will rise from €10 million to €12 million per year. Furthermore, the procedure will be simplified and the funding catalogue expanded.
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