Tax investment incentive programme in Germany underway
10.06.2025 | < 2 Minuten Lesezeit
On 4 June 2025, the German Federal Government agreed to introduce draft legislation for a tax investment programme aimed at strengthening Germany’s attractiveness as a business location. The proposal includes, among other measures, the previously announced investment booster as well as a gradual reduction in corporation tax from 2028 onwards.
The draft legislation sets out the following key measures:
- Declining balance depreciation for movable fixed assets acquired or manufactured between 1 July 2025 and 31 December 2027, calculated at a rate of up to three times the straight-line depreciation, capped at 30 % (referred to as the investment booster).
- A five-step reduction in the corporation tax rate, beginning with 14 % for the 2028 assessment period, decreasing by one percentage point annually to reach 10 % by 2032.
- A gradual reduction in the preferential tax rate for retained earnings in partnerships under Sec. 34a of the German Income Tax Act (EStG): from the current 28.25 %, to 27 % in 2028 and 2029, 26 % in 2030 and 2031, and 25 % from 2032 onwards.
- Special depreciation for electric vehicles forming part of fixed assets and acquired between 1 July 2025 and 31 December 2027: 75 % in the year of acquisition, followed by depreciation rates of 10 %, 5 %, 5 %, 3 %, and 2 % in subsequent years.
- Favourable company car taxation rules for electric vehicles: From 1 July 2025, only one quarter of the gross list price will be considered for tax purposes for vehicles with a list price of up to 100,000 euros (previously 70,000 euros).
- Enhancements to the research allowance (“Forschungszulage”): From 1 January 2026, eligible costs will be expanded to include a lump sum for overheads and other operating expenses related to research and development projects. In addition, the maximum assessment base will be increased from 10 million euros to 12 million euros for qualifying expenses incurred in each financial year.
Note: According to government sources, the German Bundestag is expected to adopt the law on 27 June 2025, with a decision in the German Bundesrat scheduled for 11 July 2025.
Contact
