Government Bill on the Tax Amendment Act 2025

In mid-November, the government's draft bill for the Tax Amendment Act 2025 (AbgÄG 2025) was introduced to the National Council. Selected important aspects are presented in an overview below. The final enactment of the law remains to be seen.

Adjustment for bracket creep by 1.7333 %

In the fight against cold progression, key elements of the income tax scale, as well as tax allowances, are automatically adjusted by two-thirds of the inflation rate (for the year 2026, two-thirds of 2.6 % is 1.7333 %) – the remaining third can be applied flexibly, but is currently suspended due to the tight budgetary situation. These increased amounts are to be enshrined in law under the Income Tax Act (EStG). No inflation-linked adjustment is made to the top tax rate of 55 %.

The thresholds applicable for the 1st to 5th tax bands in income tax from 2026 are as follows.

The repatriation of securities to accounts held by domestic custodians is facilitated

Previously, the "repatriation" of securities from foreign depositories required the foreign depository to be instructed to transmit the data to the acquiring domestic depository. From 30 June 2026 onwards, a tax-neutral transfer of securities to the UK will be possible if the taxpayer informs the competent tax authority within one month of the transferred assets, their acquisition costs, and the accepting depository.

Welcome clarification on risk insurance

The current administrative practice regarding pensions from personal risk insurance policies is to be enshrined in law. This means that pensions from personal risk insurance policies will only become subject to taxation from the point at which the sum of pension payments exceeds the pension's present value. This will prevent a disproportionate tax burden on individuals who also make private provisions or suffer a misfortune.

Clarification: Enhanced accelerated depreciation on buildings

The AbgÄG 2025 aims to legally enshrine the "object-related view" already provided for in administrative practice. Specifically, with regard to the extended accelerated depreciation for residential buildings completed between 2024 and 2026, it is to be clarified that upon the taxable transfer of the subsidised building, the buyer cannot claim the subsidy if the seller has already used the building to generate income.

Electronic procedure planned for fees and road taxes

The current paper-based procedure for fees and road taxes is to be replaced by an electronic procedure in small steps over several years. The changes are planned for 2026 for property transfer tax, 2027 for insurance taxes, and finally 2028 for fees. The technical design and organisational implementation remain to be seen and are to be carried out by ordinance respectively.

Tax liability by accounting only between businesses (B2B)

As a consequence of ECJ case law ("P-GmbH"), no VAT should arise by virtue of the invoice when an invoice is issued to a final consumer. In contrast, as before, for invoices issued to entrepreneurs, incorrectly shown VAT will lead to VAT by virtue of the invoice. This shall apply irrespective of whether the receiving entrepreneur is entitled to deduct input tax or not.

Expansion of tobacco tax to novel alternative products

The inclusion of nicotine pouches and liquids for electronic cigarettes within the scope of the tobacco tax was hotly debated. This is intended to take place from 1 April 2026 and, together with changes to tax rates on traditional tobacco products (cigarettes, cigars, etc.), is expected to contribute to additional revenue of €475 million by 2029.

Image: © Parliament Directorate / Thomas Topf