On Tuesday, April 9, 2025, the coalition parties CDU, CSU, and SPD reached an agreement on a new coalition agreement (PDF).
The coalition agreement, titled “Responsibility for Germany,” outlines the future government’s political agenda over 146 pages, including comprehensive tax policy guidelines. We would like to summarize the most relevant aspects for you below.
Tax Policy According to the Coalition Agreement
Corporate Taxation and Investment: The following measures are planned in the area of corporate taxation and tax incentives for investment:
- Investment Booster: Reintroduction of declining-balance depreciation at a rate of 30% for equipment investments between 2025 and 2027
- Corporate Tax Reduction: Gradual reduction of the corporate income tax rate from the current 15% to 10%, starting on January 1, 2028, at a rate of 1% per year. By 2032, the corporate tax rate would be 10%.
- Legal Form-Neutral Taxation: Improvements to the option model and the retained earnings relief regime
Income Tax: To provide relief for low and middle incomes, the following measures are proposed:
- Reduction in the income tax burden for low and middle-income groups through unspecified adjustments to the income tax tariff
- Child Allowance and Child Benefits: Gradual reduction of inequalities in tax relief
- The solidarity surcharge is to remain unchanged
- Single Parents: Further relief through an increase or expansion of the single-parent relief amount
- No increase of top tax rates as previously discussed
Trade Tax: The coalition agreement includes changes to the trade tax regime:
- Minimum Trade Tax Rate: Increase of the minimum multiplier from 200% to 280%
- Measures to combat the relocation of company seats to so-called “trade tax havens” due to the disparities in municipal trade tax rates
Global Minimum Tax: The minimum taxation of large multinational corporations will continue to be pursued. However, national implementation is postponed for the time being in order to avoid disadvantages for domestic companies. International developments will continue to be monitored.
Tax Incentives for Voluntary Overtime: In order to ease pressure on the labor market, overtime pay exceeding collectively agreed full-time hours will be made tax-free with immediate effect.
Tax Incentives for Voluntary Post-Retirement Employment: To further relieve the labor market, financial incentives are to be introduced to make continued employment after reaching statutory retirement age more attractive. Monthly income of up to €2,000 will be tax-free for individuals who voluntarily continue working. Measures will be put in place to prevent misuse and unintended incentives.
Tax Relief for Bonuses Encouraging Extended Working Hours: Incentives will also be provided for increasing working hours. Bonuses paid to employees for switching from part-time to full-time work will receive preferential tax treatment. Again, safeguards against abuse and unintended effects will be implemented.
VAT in the Hospitality Sector: The VAT rate on food in restaurants will be permanently reduced to 7% as of January 1, 2026.
Trainer and Volunteer Allowances:
- The trainer allowance will be increased to €3,300
- The volunteer allowance will be raised to €960