The draft bill proposes tax relief for individuals and other technical changes to tax laws and will proceed through approval by the Bundestag and Bundesrat.
Germany’s Federal Cabinet (Bundesregierung) has approved the draft of the Tax Amendment Act 2025 on 10 September 2025.
The draft bill seeks to introduce tax relief measures for individuals, along with several technical amendments to existing tax laws.
Some of the key tax measures are:
Income tax
Enhanced clarity on tax exemptions for public law entities and those in EU/EEA/Swiss jurisdictions. Updates will align investment incentives and research allowances with EU “de minimis” state aid rules.
VAT
From January 2026, VAT on restaurant and catering services (excluding beverages) will be permanently reduced to 7%.
Nonprofit law
Annual revenue thresholds for tax liability on nonprofit economic activities will rise from EUR 45,000 to EUR 50,000, easing administrative burdens. Additionally, nonprofits with annual incomes of up to EUR 100,000 will no longer be required to report the timely use of funds.
Administrative simplifications
Tax decisions on input VAT refund requests will default to electronic notifications, eliminating the need for consent. From 2026, manual consent for data retrieval notifications will no longer be required. Other updates include technical adjustments to align with EU state aid rules and harmonisation efforts.
The draft bill will now proceed through the legislative process, requiring approval from both the Bundestag (the lower house) and the Bundesrat (the Federal Council).
Earlier, the Ministry of Finance released the draft Tax Amendment Act 2025 on 5 September 2025.
