Global Daily Tax News, German Lower House Approves Corporate Tax Cut, (Jul 3, 2025)

Germany's lower house of parliament has approved legislation to implement a package of tax reliefs for corporations, including a corporate income tax cut.

Following approval from the Bundestag, the legislation will now be considered by the Federal Council, the Bundesrat, on July 11, 2025.

Under the legislation, the federal corporate income tax rate will be reduced in one percentage point increments beginning in 2028. The Government noted this will establish a combined corporate tax rate of 25 percent from 2032, down from 30 percent currently.

In addition, the Government has proposed introducing a declining-balance depreciation rate of 30 percent for investments in movable fixed assets made from July 1, 2025, until January 1, 2028. This will enable businesses to offset 30 percent of the acquisition cost against their profit in the year of acquisition. In the second and third years, they can claim another 30 percent against the remaining value.

In addition, declining-balance depreciation will be introduced for newly purchased electric vehicles between June 30, 2025, and before January 1, 2028, beginning with a depreciation rate of 75 percent, with a six-year depreciation period. Furthermore, the gross price limit for the special tax incentive for electric company cars will be increased from the current EUR70,000 to EUR100,000.

To promote investment in research, the assessment basis for the research allowance will be significantly increased. From 2026 to 2030, the upper limit for calculating the tax-deductible research allowance will increase from EUR10m to EUR12m, and expenditure eligibility will be expanded. Overhead and operating costs will be taken into account through a flat-rate discount of 20 percent, the Government has said.