Bundestag passes billions in corporate redundancy packages
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Get ready for the "Boost for Businesses" ride, as the federal government's initiative edges closer to reality. The Bundestag has given its nod, with the Bundesrat's vote being expected to follow suit. The coalition governments, looking to stir the economy out of its lengthy slumber, plan to grant extra depreciation benefits for investments and electric vehicles, pump up research funding, and eventually institute tax cuts.
Minister of Finance Lars Klingbeil hailed it as a compelling indication that Germany, alongside record state investments, is gearing up to rejoin the growth track. The CDU/CSU and SPD parliamentary factions backed the bill, while the AfD abstained. The Greens and the Left voted against it.
On July 11, the Bundesrat is slated to concur. The states and municipalities raised concerns earlier about potential high tax losses at all levels of the government. However, the federal government has now committed to reimbursing municipalities and providing substantial compensation to cover the states. Municipalities will receive compensation through an increased VAT share, while the states are set to receive an eight-billion-euro subsidy for investments in education, childcare, science, and hospital renovations.
Businesses Welcome the "Super Deductions"
This recently approved tax package includes the so-called "super deductions," granting a 30% tax break for three years on investments. This means companies will be spending less on taxes, thanks to a decrease in their taxable profit.
Additionally, there's the "Investment Booster" for electromobility, which not only increases the price cap from 75,000 to 100,000 euros per vehicle but also offers a 75% depreciation allowance in the first year of purchase.
From 2025 to 2029, companies will be relieved of nearly 46 billion euros in taxes. The federal government, the states, and the municipalities must brace themselves for approximately the same amount in reduced tax revenues.
Economy Joyous Business Sentiment amidst Crises; BDI President Offers the Government an "Outstretched Hand"
- Sources: ntv.de, rog/rts
- Tags: German Bundestag, Investments, Economic Recovery, Economic Stimulus Package
New Insights:
- Investment Booster: Detailed Breakdown
- The "Investment Booster" comprises three crucial elements: accelerated depreciation, expanded research allowance, and corporate tax rate reduction[4].
- Accelerated Depreciation: 30% annual depreciation rate for machinery and equipment investments between July 1, 2025, and December 31, 2027[1][2].
- EV Depreciation Schemes: Special depreciation measures for investments in electric vehicles[5].
- Research Allowance Expansion: The research allowance will be expanded for the years 2026 to 2030, featuring a boost in the upper limit, expanded eligible uses, and simplified flat-rate deductions[1].
- Corporate Tax Rate Reduction: The corporate tax rate will progressively decrease from 15% in 2028 to 10% over five years[2][3].
- Impact and Objectives of the Program
- The program, designed to stimulate economic growth, safeguard jobs, and strengthen Germany as a competitive business location, provides investment incentives and promises planning certainty for companies[1][2].
- Legislative Process: The bill is undergoing the legislative process, with initial approval from the Bundestag on June 26, 2025. The Bundesrat vote is scheduled for July 11, 2025[3].
The newly approved tax package, dubbed "super deductions," will provide businesses with a significant 30% tax break on investments from July 1, 2025 to December 31, 2027, as a part of the federal government's initiative to stimulate business growth and provide planning certainty. Moreover, the "Investment Booster" for electromobility includes an expansion of the research allowance for the years 2026 to 2030 and special depreciation measures for investments in electric vehicles, which will further aid businesses in the finance sector.
