The most important things at a glance
- Tax legislation is currently characterized by numerous “smaller” legislative procedures.
- The legislature did not present a comprehensive “annual tax law” this year, as was typical in previous years with a length of 200 pages including the justification for the law.
The last changes were made by the Annual Tax Act 2024 (“JStG 2024”) and the so-called Tax Development Act. In particular, the JStG 2024 provided that the transfer of individual assets between sister partnerships with identical investments is now possible in a tax-neutral manner under strict conditions, as well as the abolition of the loss offsetting restrictions in accordance with Section 20 Paragraph 6 Sentence 5 EStG for forward transactions and for losses on receivables. In addition, the so-called exit tax was extended to certain (special) investment shares.
Changes in 2025
The first changes to the law in 2025 were implemented by the law for an immediate tax investment program (dated July 14, 2025, Federal Law Gazette I 2025 No. 161; “Investment Booster”). What is particularly worth mentioning here is the reintroduction of the degressive depreciation rate for movable assets purchased/manufactured after June 30, 2025 and before January 1, 2028. The maximum percentage is limited to three times the percentage for the linear depreciation, up to a maximum of 30%. The so-called twelfths rule applies.
The law allows further funding for purely electric vehicles purchased after June 30, 2025 and before January 1, 2028. For these, an arithmetic-degressive depreciation is granted, with no pro rata reduction occurring in the year of purchase. On the other hand, the costs for purchasing these cars for the valuation of private use were increased by 0.25% from EUR 70 thousand to EUR 100 thousand.
The law also stipulates that the corporate tax rate will be gradually reduced from 15% from 2028 to 10% by 2032. The details should be regulated in further laws.
This year, lawmakers initiated numerous individual bills that include a variety of changes to tax laws. There is no major annual tax law this year.
Further changes are envisaged through the following legislative procedures, among others:
- The Location Promotion Act aims to improve financing conditions for companies, especially for small companies and start-ups. There should be relief in investing funds in renewable energies and infrastructure as well as measures to reduce bureaucracy in the financial market sector. In the tax area, changes are planned in the Investment Tax Act and the Income Tax Act. Here, the possibility of tax-neutral transfer of hidden reserves from the sale of shares in corporations (Section 6b Para. 10 EStG) is to be increased from EUR 500 thousand to EUR 2 million.
- The Tax Amendment Act 2025 provides in particular for adjustments to sales tax and distance allowances. The sales tax for food in restaurants is to be permanently reduced to 7% from 2026. The distance allowance should be increased to 38 cents from the first kilometer and the mobility bonus should remain in place even after 2026. In addition, the trainer and volunteer allowances should increase.
- Government draft of a law to modernize and digitize the fight against undeclared work (BT-Drucks. 21/1930 dated October 1, 2025): Here, Art. 4 provides for a change in the allocation of input tax for real estate according to the ratio of the usable area, unless another method should lead to a more precise economic allocation.
- The aim of the third law amending the Energy Tax and Electricity Tax Act is, in particular, to counteract the expiry of the tax relief according to Section 9b Electricity Tax Act for companies in the manufacturing sector and agriculture and forestry from January 1, 2026.
- The law abolishing the Cuxhaven free zone and amending other regulations (BT-Drucks. 21/1975 dated October 6, 2025) is intended, among other things, to reintroduce tax relief for agricultural and forestry businesses (so-called agricultural diesel).
- With the draft law on tax incentives for employees of retirement age (Active Pension Act), the federal government wants to use the active pension to create financial incentives for more employment in old age.
- Further changes are provided for by the Seventh Ordinance amending tax regulations. This includes, among other things, an adjustment of the limits according to which parts of the property used for business purposes do not have to be treated as business assets for tax purposes (Section 8 Sentence 1 EStDV, provides for an exception – regardless of the value – if the size is not more than 30 m² (Sections 8 Sentence 1, 84 Paragraph 1d Sentence 1 EStDV-E.
As soon as these changes are implemented, we will report on them.
Outlook for 2026
The decision of the Federal Constitutional Court on inheritance and gift tax is currently eagerly awaited. It is expected that the legislature will make an adjustment to the law. In particular, large acquisitions and the exemption requirement test are likely to become the focus of the reform, with proposals for reforming inheritance and gift taxes ranging up to the abolition of tax relief for business assets.
The BFH’s decisions on the possible unconstitutionality of the federal property tax model are also eagerly awaited.
In addition, a reaction from the legislature in the area of real estate transfer tax is expected, as the transition period of Section 24 GrEStG expires on December 31, 2026. Partnerships would then be treated like corporations when it comes to property transfer tax, which would have a significant impact, particularly when real estate is transferred to these companies and these shares are transferred within the family.