Coalition agreement 2025: Tax policy decisions for companies and employees

On 9 April 2025, the CDU/CSU and SPD presented their draft coalition agreement for the 21st legislative period. This will result in relevant tax policy changes, particularly for our entrepreneurial clients and employees. Below we provide an overview of the planned measures:
 

Corporate taxation:

The corporation tax (Körperschaftsteuer) rate is to be gradually reduced from the current 15% to 10% over five years from 1 January 2028. In addition, a so-called ‘investment booster’ is planned: For the years 2025 to 2027, a declining balance depreciation of 30% on investments in equipment is to be possible. At the same time, an increase in the minimum trade tax (Gewerbesteuer) rate from 200% to 280% is planned. The solidarity surcharge (Solidaritätszuschlag) is to remain in place. In addition, the VAT (Umsatzsteuer) rate on food is to be reduced (again) to 7%. At European level, the introduction of a financial transaction tax and the implementation of the global minimum tax for large corporations will be maintained.
 

Taxation of employees:

A reduction in income tax (Einkommensteuer) is planned for ‘small and medium’ incomes. Overtime in excess of full-time work and an amount of up to 2,000 euros after retirement age are to be tax-free in future. Premiums paid to part-time employees for extending their working hours are also to be tax-favoured. There are also plans to increase the commuter allowance to 38 cents per kilometer from the first kilometer from 1 January 2026.
 

Conclusion:

The tax policy plans for corporate taxation are a good approach to strengthening German small- and medium-sized companies and Germany as an investment location and making it (more) competitive. This applies in particular to the ‘investment booster’ already in place for this year. The reduction in the corporation tax rate is also welcome in principle, although the final reduction to 10% will not take effect until 2032. The changes to employee taxation are welcome and also provide the right incentives at this level, which are necessary to strengthen the German economy. It is also worth mentioning that the coalition agreement does not contain any statements on inheritance and gift tax or capital gains tax.