Tax policy – the most important points of the coalition agreement

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In the coalition agreement of April 9, 2025, the CDU/CSU and SPD present a large number of planned tax measures that will affect both private individuals and companies. Important reforms in social and tax policy are being postponed or outsourced to commissions.

Degressive depreciation as an investment incentive

A declining balance depreciation of 30% on equipment investments will be introduced for the years 2025 to 2027 (“investment booster”). This measure is to be part of an immediate action program and is intended to enable companies to claim their investment costs faster for tax purposes and thus improve their liquidity. The regulation is temporary and aims to promote investment in the years mentioned.

Mobility and the environment

The distance allowance is to be increased to 38 cents from the first kilometer from 2026; it currently stands at 30 cents per kilometer for the first 20 kilometers. In addition, the gross price limit for the tax incentives for electric vehicles as company cars is to be increased to €100,000.

Planned reduction in corporate income tax from 2028

A gradual reduction in the corporate income tax rate from the current 15% is planned from January 1, 2028. The reduction will take place in five steps, with the tax rate being reduced by one percentage point. This measure is also intended to benefit partnerships, in particular through improvements to the option model under Section 1a of the German Corporate Income Tax Act (KStG) and the favorable treatment of retained earnings under Section 34a of the German Income Tax Act (EStG). In addition, it is being considered whether, from 2027, commercial income of newly established companies, regardless of their legal form, may be subject to corporate income tax.

Adjustments to trade tax

In the area of trade tax, an increase in the minimum assessment rate from 200% to 280% is planned. This measure is intended to help prevent tax shifting to municipalities with low assessment rates and ensure a more even tax burden. In addition, administrative measures are planned to effectively prevent sham seat transfers to so-called trade tax havens.

Furthermore, the introduction of a special depreciation for electric vehicles is planned. Corporations and partnerships are to be gradually converted to self-assessment.

Income tax

In order to provide tax relief and to promote employment, a reduction in income tax for small and medium incomes is planned. In addition, overtime pay will be made tax-free in the future and bonuses for the transition from part-time to full-time work will be given preferential tax treatment. For people who continue to work voluntarily after reaching the statutory retirement age, a tax-free salary component of up to €2,000 per month is to be introduced, although it is not yet known when this will be implemented.

Child benefit and child allowances are to be further aligned, and an increase or further development of the relief for single parents is also planned. The solidarity surcharge will remain unchanged.

Indirect taxes

The VAT on food in restaurants is to be permanently reduced to 7% from January 1, 2026. In addition, the government aims to switch to a clearing model for import sales tax. In the energy sector, a reduction in electricity tax to the European minimum and a reduction in transmission grid fees are planned. For the agricultural sector, a complete reintroduction of the agricultural diesel reimbursement is planned.

Non-profit law

Planned measures to strengthen volunteering include an increase in the trainer allowance to €3,300 and the volunteer allowance to €960. The exemption limit for the commercial business operations of non-profit associations is to rise to €50,000. In addition, bureaucratic hurdles are to be reduced: For example, the requirement for timely use of funds will no longer apply to income of less than €100,000, and the obligation to divide funds into categories will no longer apply to income of less than €50,000.

Further tax measures

A special depreciation allowance for electric vehicles will be introduced and the motor vehicle tax exemption for e-cars will be extended until 2035. To combat tax avoidance, the EU “blacklist” of uncooperative tax jurisdictions is to be consistently included. Finally, digitization and the use of AI in financial management are to be promoted and digital tax returns are to be gradually made mandatory.

Do you have any questions about the planned changes? Talk to us – we will be happy to advise you.

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