Germany unveils tax reform package with super deductions and lower corporate tax to boost investment and competitiveness.
The Federal Cabinet adopted the draft law for a tax-based immediate investment program to strengthen Germany as a business location. The proposed bill is intended to implement changes in tax law quickly. With this, the federal government is strengthening Germany’s competitiveness.
This announcement was made by the German Ministry of Finance on 4 June 2025.
“With our growth booster, we are now jump-starting the economy. This secures jobs and brings Germany back on the path to growth. Just four weeks into office, we are presenting the first important reforms to restore economic strength. We’re giving the economy the urgently needed planning certainty and creating strong investment incentives. We are making Germany a more internationally competitive location. To achieve this, we are introducing super deductions of 30 percent per year until 2027 and significantly lowering corporate taxes starting in 2028. We are betting on investments and innovation – including with the booster for e-mobility and research.” According to Federal Finance Minister and Vice Chancellor Lars Klingbeil
Key tax initiatives under the program include:
- Investment booster through 30% depreciation
The draft law provides uniform and straightforward support for all companies. Expanding declining-balance depreciation (AfA) for movable fixed assets accelerates investment in the economic transformation. This ensures rapid and broad application of the depreciation benefits.A declining-balance depreciation rate of 30% will be introduced. This applies to investments made from 1 July 2025, until before 1 January 2028. - Gradual reduction of corporate tax rate to 10% from 2028
Corporate taxes will be significantly reduced. To enhance international competitiveness in terms of corporate tax burden, the current corporate tax rate will be reduced by one percentage point per year starting in 2028 – from the current 15% down to 10%.
By 2032, the overall tax burden on companies will be just under 25%, down from the current level of just under 30%. This sends an important international signal for Germany as a business location. - Investment booster for e-mobility in companies
The draft law further promotes and expands e-mobility. The general investment booster is complemented by a specific booster for e-mobility. A declining-balance depreciation for newly acquired electric vehicles between 30 June 2025, and 1 January 2028, will be introduced. This starts with a depreciation rate of 75% to ensure all companies – including small and medium-sized enterprises – benefit. The depreciation period of 6 years reflects the average useful life.For electric vehicles, the maximum list price eligible for incentives will be increased from EUR 70,000 to EUR 100,000. - Investment booster in research
To promote research investments, the eligible base for the research allowance will be significantly increased, and eligible expenses will be expanded with minimal bureaucracy.
Key criteria for the research allowance are the assessment base and the funding rate. Between 2026 and 2030, the cap on the eligible assessment base will be raised from EUR 10 million to EUR 12 million.
To simplify the process and increase the funding rate, eligible expenses will be expanded. Overhead and operating costs will be included via a flat-rate surcharge of 20%, significantly simplifying the procedure.
