"Financial Enhancer Arrives": Could it be true?

The German government has published the Act on a Tax-Based Investment Acceleration Program to Strengthen the German Economic Location on July 18, 2025. This program aims to stimulate investments, enhance competitiveness, and provide long-term planning security for businesses.

One of the key measures in the law is the reintroduction and increase of the degressive AfA for movable economic goods of the fixed assets. This allows companies to claim up to 30% special depreciation on investments in movable economic goods of the fixed assets.

The corporate tax rate will be reduced by one percentage point each year starting in 2028, with the rate reaching 10% in 2032. From 2028 onwards, the reduction in the corporate tax rate is likely to be the main impact.

The law provides for a gradual reduction of the thesaurization tax rate for undistributed profits of partnerships, aiming to achieve tax neutrality between legal forms and align the tax burden of partnerships with that of corporations.

The flat-rate research allowance covers eligible expenses incurred within the framework of contract research, effective from January 1, 2026. More types of expenses can be claimed for tax purposes in research and development projects. The basis for eligible research expenses has been increased from 10 to 12 million €.

The eligible value of expenses for self-performed work by a sole proprietor, as well as expenses within the framework of an activity agreement among partners, has been increased from 70 € to 100 € per proven working hour (maximum 40 hours per week).

Special depreciation for electric vehicles is also included in the law. The price limit for tax-favoured company cars has been raised from 70,000 € to 100,000 € (effective from January 1, 2026).

The adjustment of the thesaurization tax rate for undistributed profits is implemented in three stages, as the thesaurization benefit is not considered in the prepayment procedure. The adjustment will be as follows: in 2028 and 2029, the rate will be reduced to 27%, in 2030 and 2031, it will be reduced to 26%, and from 2032, it will be reduced to 25%.

The research allowance has been extended to additional common and other operating costs within favored research and development projects. The law does not include the reduction of the VAT rate in the catering industry, the increase in the mileage allowance, and the reduction in electricity tax, which are mentioned in the immediate program.

The greatest effect is expected from the investment booster (up to 12 billion € in relief). The law contains a range of tax relief and incentive measures, offering both short-term investment incentives and long-term relief.

The law is expected to result in reliefs of 2.5 billion € in 2025, 8.1 billion € in 2026, and 11.3 billion € in 2029. Despite the author of the Betriebsvereinbarung (company agreement) published on July 18, 2025, not being explicitly named in the provided search results, the program is set to significantly impact the German economy.