Germany unveils €46B tax relief plan
The German cabinet approved a tax relief package worth 46 billion euros ($52.43 billion) to boost business investment and revive the nation’s sluggish economy through 2029. The measure is designed to provide companies with enhanced planning certainty and incentivize growth by easing their tax burden.
Key components of the package include accelerated depreciation options, allowing companies to deduct up to 30% per year over three years for investments in machinery and equipment made between mid-2025 and January 2028. Businesses purchasing new electric vehicles can also benefit, as they are permitted to depreciate 75% of the cost in the first year to encourage cleaner technologies. Additionally, the federal corporate tax rate is set to decline from 15% to 10% by 2032, with a one percentage point reduction annually beginning in 2028. Enhanced tax incentives for research and development are also part of the strategy.
Finance Minister Lars Klingbeil emphasized that the relief package is aimed at reinforcing Germany’s competitiveness on the global stage while providing companies with strong investment incentives. The reforms come at a critical time as Germany’s economy faces the prospect of a third consecutive year of contraction—a scenario unprecedented in its post-war history—and is expected to be further challenged by U.S. President Donald Trump’s tariff policies, which could adversely affect Germany's export-driven market.
The government’s plans have already had a positive impact on financial markets, with the DAX index reaching record highs following the announcement. Despite the optimistic market reactions and support from many industry groups, some economists note that additional reforms—such as reducing energy costs and streamlining bureaucratic procedures—will be essential for long-term economic recovery.
