Federal Council Adopts Immediate Investment Programme

Key Measures at a Glance 

1. Declining Balance Depreciation for Movable Assets (§ 7 para. 2 EStG) From 1 July 2025 to 31 December 2027, companies may again use declining balance depreciation at 30% annually for investments in movable fixed assets—regardless of their purpose. The aim is to stimulate short-term investment decisions through temporary tax relief.

2. Gradual Reduction of Corporate Income Tax (§ 23 para. 1 KStG) Beginning in 2028, the corporate tax rate will be lowered in six annual steps from 15% to 10% by 2032. The goal is to enhance Germany’s tax competitiveness—especially in comparison to France, where the current combined corporate tax rate stands at 25–26%. Related adjustments in withholding tax law are also planned.

3. Reduced Tax Rate for Retained Earnings (§ 34a EStG) For sole proprietors and partnerships, the so-called retention tax rate will be gradually reduced to 25% by the 2032 assessment year. This promotes tax parity with corporations and incentivizes reinvestment.

4. New Depreciation Scheme for Electric Vehicles (§ 7 para. 2a EStG) For newly acquired all-electric vehicles between July 2025 and December 2027, a stepwise declining depreciation schedule will apply:

• 75% in year of acquisition
• 10% in year 2
• 5% in years 3 and 4
• 3% in year 5
• 2% in year 6

This is particularly relevant for cross-border fleet structures and corporate sustainability strategies.

5. Higher Vehicle Price Threshold for Electric Company Cars (§ 6 EStG) The gross list price limit for the 1% rule and logbook method will increase from €70,000 to €100,000 for electric company cars—making premium e-models more attractive from a tax perspective.

6. Enhanced Research Tax Credit (§ 3 FZulG) From 2026, the annual funding cap will increase from €10 million to €12 million. In addition, indirect and operating costs will be subsidized at a flat rate of 20%, particularly in contract research. For individuals and partnerships, the eligible hourly rate rises from €70 to €100.

Impact on Franco-German Enterprises

These tax reforms are designed not only as national stimulus measures but as a strategic lever to strengthen Germany’s position in the EU single market. They offer several advantages for Franco-German business models, such as subsidiaries, permanent establishments, or joint R&D projects:

• Investment planning certainty through fixed transition rules and staged tax rates
• Improved fiscal attractiveness of Germany relative to France and other EU countries
• Greater innovation capacity for cross-border R&D through expanded research credits
• Sustainable mobility promotion, enabling the tax-advantaged use of e-company cars registered in either country

According to the German government, the total relief volume of these reforms is expected to amount to €46 billion by 2029, offering considerable strategic options for multinational corporations operating in both Germany and France.