Germany's 2025 Investment Program Expands Tax Incentives and Depreciation Benefits for Companies
Germany's schwarz-rote coalition approves a 2025 investment program with enhanced depreciation rules and tax cuts to support corporate investment and innovation.
- • Geometric-degressive depreciation allowed for movable assets acquired between July 2025 and end of 2027.
- • Electric vehicles can be depreciated arithmetically-degressively over six years with favorable rates.
- • Taxation of company cars for emissions-free vehicles will benefit from a higher purchase price threshold from July 2025.
- • Corporate tax rate will gradually reduce from 15% to 10% by 2032, easing the tax burden on companies.
Key details
Germany's schwarz-rote coalition has advanced a comprehensive investment program aimed at bolstering company investment and economic resilience amid ongoing geopolitical and structural challenges. Approved before the parliamentary summer break, the program builds on the prior growth initiative of the former traffic light coalition, introducing enhanced depreciation rules and tax reforms to increase business liquidity and reduce tax burdens.
Key elements include geometric-degressive depreciation for movable assets acquired from July 2025 until the end of 2027, permitting companies to depreciate up to three times the linear rate capped at 30% of acquisition costs. This method, utilized during the COVID-19 pandemic, is designed to provide firms with accelerated write-downs and thus greater immediate liquidity. For electric vehicles, the program introduces arithmetical-degressive depreciation over six years, with a higher initial depreciation rate compared to earlier proposals.
Additionally, the taxation framework for company cars will become more favorable for emissions-free vehicles, raising the purchase price threshold subject to taxation from €70,000 to €100,000 starting July 2025. The government is also enhancing incentives for research and development by increasing the eligible expense ceiling for research grants from €10 million to €12 million beginning January 2026, and permitting greater inclusion of overhead costs.
A gradual corporate tax reduction is another critical component, lowering the corporate tax rate from the current 15% to 10% by 2032. Similarly, the tax rate applicable to undistributed profits of sole proprietorships will see reductions, aiming to ease the overall tax burden on enterprises.
These measures collectively seek to empower German businesses with more financial flexibility to invest strategically, innovate, and expand, safeguarding economic stability in a changing global environment.
According to an analysis from AnlegerPlus, “The program aims to provide companies with additional liquidity for investments and reduce their tax burden, supporting the economy amidst geopolitical and structural challenges.” (Source ID: 110877)