Germany has enacted a new investment programme law to enhance its appeal as a competitive business location, with most provisions effective from 19 July 2025 and R&D measures applying from 2026.

Germany has published the Act (BGBl. I) in the Official Gazette on 18 July 2025, establishing an investment programme aimed at strengthening the country’s position as a competitive business hub.

The Act came into effect on 19 July 2025, with the exception of the research and development provisions which will apply from 1 January 2026. Key tax measures are:

  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.

Earlier, Germany’s Federal Council (Upper House of Parliament/Bundesrat) approved the bill on 11 July 2025.