Dive into Germany's New Tax Relief Package: A Boost for Businesses and the Economy
Government grants significant tax reductions for businesses via approved legislation
Germany's federal government, under the leadership of Chancellor Friedrich Merz, has moved fast by approving a bang-on multi-billion euro tax relief package. This refreshing news for businesses comes after the government's announcement in Berlin on Wednesday. The plan targets a significant financial relief for companies, amounting to approximately 46 billion euros over the years 2025 to 2029.
This welcomed decision may trigger lower tax revenues for the federal government, states, and localities, potentially causing a ripple in the Bundesrat. Interestingly, the legislative process for this tax relief bill is already underway, with the first debate on the package set for Thursday in the Bundestag. Providing they speed things up, major decisions regarding this bill could be made before the summer break.
At the heart of this bill lies the concept of so-called super-depreciations of 30 percent for a stretch of three years on investments. Additionally, the bill proposes a gradual reduction of the corporate tax rate by 1 percentage point annually starting from 2028. To stimulate the market for electromobility, an "investment booster" is also introduced, which lifts the price cap for electric vehicles and offers a bountiful 75 percent depreciation option during the first year of acquisition. The tax-funded research promotion is also set to receive a lift.
In the face of two years of recession and predictions of stagnation in 2023, the new coalition aims to brighten the economic landscape. The current relief measures, along with planned state investments in infrastructure and disbursement of energy price relief, aim to spearhead economic recovery.
For the insatiable:
- In addition to efforts to boost the economy, the package also seeks to lower carbon emissions by supporting green technologies like electric vehicles.
- The bill plans to start the special depreciation for electric vehicles from as early as July 2025.
- The German government strives to establish associated legislation by late June 2025 to pass the bill.
- The expected positive impact on the economy includes a boost to growth-generating investments, contributing to the stabilization of long-term expectations.
[source: ntv.de, RTS]
[1] [source: ntv.de][2] [source: RTS][3] [source: Forbes.com] (optional since it had more interpretative content)
The tax relief package, meticulously crafted by the German government, includes not only stimulating measures for businesses but also finance provisions for employment policies. For instance, it proposes super-depreciations of 30 percent on investments and gradual reduction of the corporate tax rate, all aimed at encouraging growth-generating employment.
The bill, scheduled for first debate in the Bundestag on Thursday, also introduces an 'investment booster' for electric vehicles, offering a 75 percent depreciation option during the first year of acquisition, a move that could potentially boost employment in the electric vehicle industry.
