The tax reform package is aimed at promoting investment and growth through enhanced depreciation, phased corporate tax cuts, EV incentives, and expanded R&D relief.

The German lower house of the parliament (Bundestag) approved the “Act for an Immediate Tax Investment Programme to Strengthen Germany’s Business Location” on 26 June 2025, which includes a EUR 46 billion corporate tax relief package aimed at boosting investment and economic growth. The bill remains subject to approval by the Bundesrat (Federal Council).

The Act introduces five key tax measures:

  1. Investment booster -The Investment Booster temporarily reinstates and enhances declining balance depreciation for movable fixed assets. It applies to assets acquired or produced between 1 July 2025 and 31 December 2027, allowing depreciation of up to 30%, capped at three times the standard straight-line rate. A similar measure was last in effect for investments made from April to December 2024.
  2. Corporate tax rate reduction – A phased reduction of the corporate tax rate from 15% to 10%, starting in 2028:
    • 2028: 14%
    • 2029: 13%
    • 2030: 12%
    • 2031: 11%
    • From 2032: 10%
  3. Retained earnings tax rate reduction – A corresponding reduction in the income tax rate for retained earnings in partnerships from 28.25% to 25%, also starting in 2028:
    • 2028–2029: 27%
    • 2030–2031: 26%
    • From 2032: 25%
  4. Tax incentives for electric vehicles – Introduction of a declining balance depreciation scheme for commercially used, purely electric vehicles acquired between 1 July 2025 and 31 December 2027:
    • Year of acquisition: 75%
    • Year 1: 10%
    • Years 2 and 3: 5% each
    • Year 4: 3%
    • Year 5: 2%
      Additionally, the gross list price cap for company electric cars eligible for the flat-rate 1% private use taxation is raised from EUR 70,000 to EUR 100,000.
  5. Research allowance reform – Expanded eligible expenses to include 20% flat-rate overhead and operating costs for R&D projects starting after 31 December 2025. The maximum assessment base increases from EUR 10 million to EUR 12 million, raising the maximum allowance from EUR 2.5 million to EUR 3 million.