The tax plans of the new federal government of the CDU/CSU and SPD, in the recently adopted coalition agreement, provide for numerous tax changes for businesses and the self-employed. Since all measures are subject to a so-called funding condition, it remains to be seen how the grand coalition’s tax policy proposals will be implemented. The plans affect many areas, from retirement provision to corporate taxes and income tax. Specifically, the following are planned:

Corporate tax

To encourage investment, companies will be able to depreciate equipment purchases or production investments by 30 percent per year over the next three years. After this measure expires, the corporate tax rate will be reduced from the current 15 percent by one percentage point over five years, starting in January 2028. Partnerships will also benefit from this.

Significant improvements are also planned for the option model, under which partnerships can request that profits be taxed in the same way as corporations, and the retention benefit, under which it is possible to request that undistributed profits be taxed initially at only 28.25 percent.

In addition to the special depreciation for electric vehicles, corporations and partnerships will gradually transition to self-assessment. Furthermore, the new government intends to further curb fictitious relocations to trade tax havens. Furthermore, the minimum trade tax assessment rate will be increased from 200 to 280 percent.

For further questions regarding the new corporate tax regulations, please contact the experts at Altehoefer International Tax Consulting.

Income tax

The new government plans to reduce income taxes for low- and middle-income earners midway through its legislative term and create tax incentives for overtime work. Therefore, overtime bonuses will be made tax-free. Pensioners who voluntarily work longer hours will be allowed to earn up to €2,000 per month tax-free. Starting in 2026, the travel allowance will be 38 cents for the first kilometer. The solidarity surcharge will remain unchanged.

The sales tax on food in restaurants is to be permanently reduced to seven percent as of January 1, 2026. One year later, businesses with an annual turnover of over €100,000 will be required to operate a cash register. In addition to cash, digital payment options should always be offered for payment transactions.

Retirement provision

With the so-called Early Start Pension, the grand coalition is planning an innovation: For every child between the ages of six and 18 who attends an educational institution, it will pay ten euros per month into an individual, funded, and privately organized retirement savings account. The savings will grow tax-free and be protected from government intervention. Also planned is a reform of the existing Riester pension into a new retirement savings product.

For further questions regarding the new income tax regulations, please contact the experts at Altehoefer International Tax Consulting.