A German government is set to introduce a comprehensive package of tax cuts for businesses, with the total relief growing over the years and reaching 17 billion euros by 2029, according to a draft law.
The German Finance Minister, Lars Klingbeil, aims to implement several measures agreed upon with the coalition partners, the Union and the SPD, in the coalition contract. These measures include an “Investments Booster”, a reduction in corporate tax and new depreciation rules for electric vehicles. The government claims that the law will send a strong signal to the business location in Germany, emphasizing its competitiveness and long-term sustainability.
The “Investments Booster” will provide special depreciation for companies that make investments in 2025, 2026 and 2027. The 30% depreciation will be applicable from June 30, 2025, to January 1, 2028. After the three-year period with the super-depreciation, a reduction in corporate tax is planned.
Starting from January 1, 2028, the corporate tax rate will be reduced by five percentage points every year until 2032, reaching a rate of 10%. The law also foresees a more generous research and development tax allowance and a special depreciation for companies that purchase electric vehicles, with a depreciation of 75% in the year of purchase.
The total volume of the tax cuts will grow over the years, with 2.5 billion euros in the current year, 8.1 billion euros in the following year and 11.3 billion euros in 2029. Due to the initial focus on depreciation through the “Investments Booster”, the state’s revenue will decline in a staggered manner. The revenue shortfall is expected to be around 630 million euros in the current year, growing to four billion euros in 2026 and 17 billion euros in 2029, with the losses being shared among the federal, state and local governments.