Dear Clients, Partners and Friends,
It was adopted—the so-called "Booster of Growth"—which opens completely new opportunities for tax planning!
With the Law for an Immediate Investment Tax Program to Strengthen Germany as a Business Location, coming into effect as of July 19, 2025, Germany attempts to become interesting again for investments. Below, we introduce the tax changes brought about by this law and explain how you can use them strategically in your favor and that of your business.
What is an "Investment Booster"?
This refers, among other things, to the reintroduction of declining-balance depreciation (“degressive depreciation”). These amendments shall be in force for movable fixed assets acquired or manufactured after June 30, 2025, but prior to January 1, 2028.
Declining-balance depreciation allows a tax deduction three times the straight-line depreciation, with a maximum of 30% per year.
This speeds up depreciation charges in the early years and thus reduces taxable income, conserves liquidity , and may yield interest effects. Over the long term, total depreciation remains the same, but the ability to write off up to 30% in year one can have a big impact.
Example:
Suppose the managing director of a GmbH purchases a refrigerator for €3,000 (net) on January 1, 2026, for the office kitchen—a wish from the team for quite some time.
- Under normal linear depreciation: €300/year over 10 years.
- Under declining-balance depreciation: €900 (30%) can be deducted in year one.
Tax effect:
- With declining-balance: €135 tax saved (€900 × 15%)
- With straight-line: only €45 saved.
E-Mobility at a Blitzing Pace
Another “investment booster” applies to business-used electric vehicles. In the year of acquisition, 75% of the purchase cost may be depreciated directly.
This applies to vehicles powered solely by electric motors and acquired after June 30, 2025, and before January 1, 2028.
For example, an EV costing €70,000 (net) results in €52,500 depreciation in the first year!
Of course, any capital gain on disposal in later years will increase accordingly.
What About Corporate Income Tax? It’s Going Down!
A key highlight of the law is the gradual reduction of corporate income tax:
- Starting 2028, the rate will decrease by 1 percentage point per year, from 15% to 10% by 2032.
- The rate on retained earnings (§ 34a EStG) will also fall: from 28.25% (until 2027) to 25% by 2032.
Double benefit: Strategic investors gain from accelerated write-offs now AND lower tax rates later!
What Should You Do Now?
Review your planned investments — is it better to delay or bring them forward?
Consider using declining-balance depreciation as a liquidity tool.
Keep future tax rates in mind for your business planning.
Want to know how this new investment program could benefit your company? Let’s talk — we’re here to help you optimize your investment and long-term tax strategy.
This communication contains general information and does not constitute specific legal advice. For personalized guidance, please reach out to us directly.
