AGN EMEA Tax Committee News
On 11 July 2025, the Federal Council approved the law for an immediate tax investment programme to strengthen Germany as a business location.
– What do these changes mean for your clients operating in or with Germany?
– How can you help them stay compliant and seize new opportunities?
– What are the implications for internationally active businesses across EMEA?
The tax changes are intended to stimulate investment that will ensure a sustainable, growth-promoting environment and planning security for companies in Germany. The tax law changes also affect annual financial statements under commercial law and financial statements prepared in accordance with IFRS accounting standards with regard to deferred taxes.
The following measures, amongst others, were decided upon:
1. Reduction of the Corporate Tax Rate
The current tax rate of 15% will continue to apply until the end of 2027. From 2028, it will be reduced by 1% annually until it reaches 10% in 2032.
| Year | Corporate tax rate |
|---|---|
| Until 2027 | 15% |
| 2028 | 14% |
| 2029 | 13% |
| 2030 | 12% |
| 2031 | 11% |
| 2032 | 10% |
In addition to corporate tax a solidarity surcharge and a trade tax should also be paid. Trade tax is levied by the municipality in which the company has its place of business. Trade tax amounts to approximately 15%, depending on the location of the place of business. Existing deferred taxes must be revalued. Due to the gradual reduction, different tax rates must generally be applied, depending on the reversal date.
2. Reintroduction and Increase of Declining Balance Depreciation for Movable Fixed Assets – “Investment Booster”
Declining balance depreciation can be used instead of straight-line depreciation for movable fixed assets acquired or manufactured after 30 June 2025 and before 1 January 2028. The percentage to be applied may not exceed three times the percentage applicable to straight-line depreciation and may not exceed 30%.
3. Extension and Increase of the Research Allowance
The main change is the introduction of a flat-rate surcharge of 20% for the overhead and other operating costs on the assessment basis. The surcharge applies to research and development projects that start after 31 December 2025.
Furthermore, for eligible expenses incurred after 31 December 2025, the maximum assessment basis for the research allowance will increase from EUR 10 million to EUR 12 million per year. This results in a maximum research allowance of EUR 3 million per year. By raising the maximum assessment basis in conjunction with a 10% bonus, small and medium-sized enterprises will theoretically be able to apply for up to EUR 4.2 million research allowance per year in future. This applies to companies that employ fewer than 250 people and either have an annual turnover of no more than EUR 50 million or whose annual balance sheet total does not exceed EUR 43 million.
Moreover, the eligible value of hours worked for own contributions will increase from EUR 70 to EUR 100 per proven hours worked.
4. Introduction of a so called Turbo-Depreciation Allowance for Newly Purchased Electric Vehicles
The purchase of a new fully electric vehicle is to become more attractive to companies from a tax perspective. In the year of purchase, 75% of the acquisition costs can now be written off. In the following year, a further 10% can be deducted; in the second and third subsequent years 5% each, in the fourth subsequent year 3% and in the fifth subsequent year 2%. The regulation applies to the purchase of an electric vehicle in the period from July 2025 to December 2027.
Brought to you by the AGN EMEA Tax Committee
If you have any questions in relation to this article, please get in touch with Christine.
Christine Ries
Tax Consultant
Wirtschaftstreuhand Group
