German Parliament green-lights billions in cost-cutting measures for businesses
Revved-Up Reboot: Billion-Euro Boost for German Businesses Clears Parliament
Get ready for Germany's economy to roar back to life! The "Investment Booster" bill, aimed at revitalizing the stagnant economy, has sailed through the Bundestag with ease. The CDU/CSU and SPD factions are all for it, while the AfD abstained, and the Greens and Left Party voiced their dissent. With the Bundesrat as the only remaining hurdle, approval seems imminent, even there, as the federal government promises generous compensation to state and local governments.
German Siege Mentality, Not Crises, Improves Mood
On July 11, the Bundesrat is expected to cast its votes in favor of the bill. Previously, the states and municipalities raised concerns about the package's initial tax losses at all levels. However, the federal government has pledged to cover all losses for municipalities through increased VAT shares, and provide an eight-billion-euro subsidy to states for investments in education, childcare, science, and hospital renovations.
Companies Gear Up for a Tax Windfall
The tax package includes a three-year super-deduction of 30% per investment in machinery and equipment, starting from July 1, 2025, and ending on December 31, 2027. This reduction in taxable income means significant savings for companies. Furthermore, the corporate tax rate is set to drop by one percentage point each year, starting in 2028, extending to a 10% rate by 2032. Companies stand to benefit from almost 46 billion euros in tax relief between 2025 and 2029.
The "Investment Booster" package also includes incentives for electric vehicle purchases and expanded research funding, while a separate infrastructure modernization fund of 500 billion euros signals a comprehensive approach to economic revitalization. The measures are designed to drive economic growth, enhance Germany’s appeal as a business location, and encourage sustainable investment.
Stay tuned as the German economy gears up for a rebirth!
- German Bundestag
- Economic Stimulus
- Investment Booster Package
- Business Investment
In-Depth Insights:The German "Investment Booster" economic stimulus package, formally adopted by the Federal Cabinet in early June 2025, includes several key components aimed at stimulating growth, investment, and competitiveness in Germany:
- Super-Deductions (Investment Booster): Companies can apply an accelerated depreciation of 30% per year (declining balance method) on investments in movable fixed assets such as machinery and equipment from July 1, 2025, to December 31, 2027, enabling them to reduce taxable income more efficiently.
- Corporate Tax Rate Reduction: Following the investment booster period, the corporate tax rate will decrease gradually from 15% to 10% over five years starting in 2028, enhancing Germany's attractiveness as a business location.
- Electric Vehicle Incentives: Tax breaks will be provided for companies purchasing electric vehicles, with the gross list price limit qualifying for the benefits raised to 100,000 euros for vehicles acquired after June 30, 2025.
- Expanded Research Allowance: The upper limit for the tax assessment of the research allowance will increase from 10 million euros to 12 million euros, with eligible uses broadened and simplified through flat-rate deductions to reduce bureaucracy.
- Infrastructure Fund: Although not part of the immediate tax investment program, the government has approved a separate 500 billion-euro fund for infrastructure modernization over the next 12 years, signaling a comprehensive approach to revitalizing the economy.
The German "Investment Booster" package combines immediate super-deductions on equipment and machinery, gradual corporate tax cuts, enhanced incentives for electric vehicle purchases, and expanded research funding to drive both short-term economic stimulus and long-term competitiveness, securing jobs, stimulating investment, and modernizing Germany’s economy effectively[1][2][3][5].
- The 'Investment Booster' package, recently approved by the German Bundestag, includes a business-focused employment policy with a super-deduction of 30% per investment in machinery and equipment, as part of the economic stimulus aimed at boosting German businesses and improving the country's appeal as a business location.
- The finance department's community policy also features in the 'Investment Booster' package, with plans for a corporate tax rate reduction from 15% to 10% over five years, starting in 2028, in addition to incentives for electric vehicle purchases and expanded research funding to encourage sustainable investment and strengthen Germany's competitive edge in the global business landscape.
