Klingbeil proposes reducing corporate tax rates
Financial Reprieve for Businesses Worth 17 Billion Euros: Klingbeil Plans Extensive Tax Reductions
German Finance Minister Lars Klingbeil has unveiled a 17 billion euro tax relief plan for businesses, aimed at stimulating investment and growth, according to the "Handelsblatt." The relief package, expected to take effect over the coming years, will consist of multiple measures, including an investment boost, corporate tax cuts, and new depreciation rules for electric vehicles.
Key Provisions of the Relief Plan
The package, which forms part of a broader economic reform agenda by the current government, will commence with a relief of 2.5 billion euros for businesses in 2025. This figure is anticipated to surge to 8.1 billion euros in 2026 and peak at 11.3 billion euros by 2029, indicating a substantial decline in tax revenue at the federal, state, and municipal levels [1].
A significant portion of the plan centers around an "investment booster," providing companies with special depreciation allowances. From June 30, 2025, through January 1, 2028, businesses can deduct 30% of their investments, designed to accelerate deductions and encourage prompt investment [1].
Additionally, the corporate tax rate is slated to be lowered progressively from 15 to 10% by 2032 in five steps. This long-term tax cut aims to enhance business profitability and competitiveness [1].
To promote environmentally friendly investments, the plan includes enhanced depreciation allowances for companies purchasing electric vehicles. In the acquisition year, these companies can claim a 75% write-off [1].
Research and development incentives are also to be strengthened, offering a more generous framework for tax credits to benefit companies investing in innovation and technological development [1].
Broader Economic Strategy
The tax relief measures are components of Chancellor Friedrich Merz's government's broader effort to rejuvenate the sluggish German economy. This initiative includes reducing tax burdens for businesses, streamlining energy project approvals, and establishing a substantial infrastructure investment fund totaling €500 billion. Planning security for citizens and businesses is a primary objective, emphasized by Vice Chancellor and Finance Minister Lars Klingbeil [4].
Implementation Timeline
Some elements of the tax relief measures are expected to become law as early as summer 2025, with the full package anticipated to be adopted by the cabinet in September 2025. The measures are viewed as crucial for counteracting Germany’s economic downturn and stimulating growth [4].
Sources: ntv.de, lve/rts
[1] "17 billion euro tax relief plan for businesses," Handelsblatt, 2023.[4] "Merz government presents economic stimulus package," ntv.de, 2023.
- The German Finance Minister, Lars Klingbeil, has announced that the employment policy will be a significant part of the 17 billion euro tax relief plan, with corporate tax cuts and new depreciation rules for electric vehicles included to encourage business investment and growth.
- The financial relief plan, aimed at rejuvenating the German economy, also includes a broader economic strategy that focuses on reducing tax burdens for businesses, streamlining energy project approvals, and establishing a substantial infrastructure investment fund, emphasizing planning security for citizens and businesses.
