Germany Launches New Tax Incentives to Boost Business Investments from July 2025

The German government has approved a new tax investment package aimed at revitalizing business investments amid a cautious economic climate. Effective July 1, 2025, businesses will benefit from a 30% declining depreciation rate, enabling companies to claim investments more swiftly and encourage greater capital expenditure. Additionally, businesses purchasing new electric vehicles between June 30, 2025, and January 1, 2028, can depreciate 75% of the purchase price, with the gross price limit for electric company cars raised from €70,000 to €100,000.

The package also enriches research grants for small and medium-sized enterprises (SMEs) by increasing the eligible base for tax deductions from €10 million to €12 million for the period 2026 to 2030. Furthermore, the corporate tax rate will be gradually lowered from 15% to 10% starting in 2028, aiming to reduce the overall corporate tax burden from nearly 30% to approximately 25% by 2032.

Federal Finance Minister Lars Klingbeil (SPD) highlighted these measures as key to fostering growth and innovation within Germany's economy. Industry leaders have reacted positively, signaling support for the government's commitment to improving the investment climate.

This reform comes alongside regional initiatives such as Baden-Württemberg's 'Spitze auf dem Land' program, which allocates €4 million to innovative SMEs in rural areas focusing on digitalization, medical technology, and circular economy sectors. This program, co-financed by the EU, aims to preserve and enhance the state's technological leadership by supporting small companies, particularly those under 100 employees, with grants of up to 20% of their investments.