Fiscal Incentives for Investments: Germany Sets the Tone

Background and Objectives

The programme aims to provide companies with planning certainty through tax relief, stimulate investment, and promote sustainable growth and employment. Between 2025 and 2029, it provides for tax benefits amounting to approximately €46 billion
(Source: Bundesregierung.de).

Key Elements of the Investment Programme

1. Investment Booster (Declining Balance Depreciation)

• • From 1 July 2025, businesses can depreciate capital goods at a 30% declining rate(max. 30% p.a.) until 31 December 2027.
  • The front-loaded tax relief is intended to reduce investment hesitation.

2. Corporate Tax Reduction

• • From 2028, the corporate tax rate will gradually be reduced from 15% to 10% by 2032, resulting in an overall tax burden of around 25%.

3. Retained Earnings Privilege

• • Retained profits will be taxed at 25% instead of 28.25%, gradually implemented between 2028 and 2032.

4. Incentives for E-Mobility Investments

• • New electric vehicle acquisitionsbetween 30 June 2025 and 31 December 2027 will be eligible for 75% depreciation in the first year, followed by stepwise reductions.
  • The gross list price thresholdfor company electric cars will be raised to €100,000.

5. R&D Support

• • The research tax creditwill increase. Overhead and operational costs will be subsidized at a flat rate of 20%, with the cap raised from €10 million to €12 million (2026–2030).

6. Compensation for States and Municipalities

• • Federal states (e.g. North Rhine-Westphalia) are calling for compensation for lost tax revenue.
  • The Federal Council (Bundesrat) will address this issue on 11 July 2025.
  • States such as Baden-Württemberg and NRW stress the importance of the “connectivity principle”(Konnexitätsprinzip).

Legislative Status

• The German Bundestag approved the programme on 26 June 2025.
• The final Bundesrat decision is scheduled for 11 July 2025.

Relevance for Franco-German Enterprises

• Tax Competitiveness: Improved depreciation rules and lower corporate tax rates enhance Germany’s appeal – also compared to France.
• Green Investments: E-mobility incentives promote sustainability in cross-border operations.
• Research Collaboration: Increased R&D tax benefits support bilateral innovation projects.
• Legal Certainty: Defined timelines improve strategic investment planning.

Outlook

This immediate investment programme represents the first step in a series of growth-oriented reforms – both nationally and in Franco-German business relations. Monitoring and evaluation will determine the actual impact and ensure that regions are fairly compensated for revenue shortfalls.