Two dates matter for investments in Germany. Until 31 December 2027, enhanced depreciation applies to machinery and equipment. From 2028, corporation tax – the tax on the profits of corporations – falls year by year from 15% to 10%. If you plan now, you can combine both. This article puts the incentives into context and sets out the counter-arguments you should also be aware of.
The market: large, central, open to investors
According to Eurostat, Germany has around 83.5 million inhabitants (1 January 2026) and generates 24.0% of the EU's economic output (2025). A German company sells into the EU single market of around 452 million people. The government's investment promotion agency, Germany Trade & Invest (GTAI), counted a total of 1,564 foreign greenfield and expansion projects in 2025. For the first time, China was the leading country of origin with 228 projects, ahead of the USA with 206. According to GTAI, investors cite the close links between industry, science and research, legal certainty and the skilled workforce as strengths.
Tax window 1: declining-balance depreciation until the end of 2027
Depreciation (AfA) spreads the cost of an investment over its useful life and reduces taxable profit. Normally, this happens in equal annual amounts. For movable assets acquired or produced after 30 June 2025 and before 1 January 2028, the law allows a faster method: up to three times the straight-line rate, capped at 30% of the remaining book value each year (§ 7 Abs. 2 EStG). The year of acquisition is the year of delivery (§ 9a EStDV), not the year of the order.
Suppose your German company buys a testing system for €1 million with a ten-year useful life and takes delivery in January 2027. On a straight-line basis, €100,000 would be deductible in the first year; on a declining-balance basis, €300,000. At a tax burden of around 30%, this leaves almost €60,000 more liquidity in the business in the first year. The total amount depreciated does not increase – it is simply brought forward. The effect only helps if the company is profitable. For electric vehicles, a special rule of 75% in the year of acquisition applies over the same period (§ 7 Abs. 2a EStG). All the measures are described in detail in our article on the investment booster.
Tax window 2: corporation tax falls from 2028 to 2032
In Germany, corporations pay corporation tax plus the solidarity surcharge to the federal government and trade tax to the municipality. Each municipality sets its own trade tax multiplier; from 2027, it must be at least 280% (§ 16 Abs. 4 GewStG). Under § 23 KStG, corporation tax falls in steps of one percentage point. In simplified terms, this gives:
| year | Corporation tax | incl. solidarity surcharge | Total at a 400% multiplier | Total in Mannheim (430%) |
|---|---|---|---|---|
| until 2027 | 15 % | 15,8 % | 29,8 % | 30,9 % |
| 2028 | 14 % | 14,8 % | 28,8 % | 29,8 % |
| 2029 | 13 % | 13,7 % | 27,7 % | 28,8 % |
| 2030 | 12 % | 12,7 % | 26,7 % | 27,7 % |
| 2031 | 11 % | 11,6 % | 25,6 % | 26,7 % |
| from 2032 | 10 % | 10,6 % | 24,6 % | 25,6 % |
The calculation assumes that trade income equals profit. The Federal Ministry of Finance summarises the effect as follows:
“The overall tax burden for companies will thus be just under 25% from 2032, instead of just under 30% at present” (our translation)
Federal Ministry of Finance, Wachstumsbooster (growth booster)
The combination is the real lever: investments made by the end of 2027 reduce profits at a rate of around 30%. The returns they generate fall into years with lower rates. The law has been passed and promulgated in the Federal Law Gazette (BGBl. 2025 I Nr. 161). Profits paid to a parent company abroad are additionally subject to withholding tax. How this can be reduced is shown in our article Repatriating profits from Germany.
Research: an allowance of up to 25%
The research allowance is credited against corporation tax; any excess is paid out (§ 10 FZulG). It therefore also works in loss-making years. It amounts to 25% of eligible expenses, and small and medium-sized enterprises can claim ten percentage points more (§ 4 FZulG). For expenses incurred after 31 December 2025, the assessment base is capped at €12 million a year; for new projects, a 20% flat rate for overheads is added (§ 3 FZulG). Important for groups: the cap applies to affiliated companies as a whole, not per company (§ 3 Abs. 6 FZulG). More on this in our article on the Research Allowance.
“Tax incentives are a good reason, but never the only one. We first assess every project without any incentives. If it stands on its own, depreciation and falling corporation tax are an advantage, not the foundation.”
Fatma Tabak, tax advisor · TABAK Steuerberatung
The honest counter-arguments
- Energy prices: According to Eurostat, medium-sized non-household electricity customers in Germany paid around €0.23 per kilowatt hour in the second half of 2025 – the third-highest figure in the EU after Ireland and Cyprus. The EU average was around €0.18. Manufacturing companies can apply for relief from electricity tax: €20 per megawatt hour against a standard rate of €20.50 (§§ 3, 9b StromStG).
- Red tape: GTAI itself explicitly names reducing bureaucratic hurdles as an important task. Investors notice it in notary appointments, the transparency register, reporting obligations and investment screening. For the latter, a ministerial draft for a dedicated law has been published (as of 13 October 2026); it has not yet been passed.
- Population: According to Eurostat, Germany's population fell in 2025. Immigration did not offset the excess of deaths over births. Skilled labour therefore remains a planning issue. The Federal Employment Agency assesses shortages for every occupation each year; a look at this analysis belongs in every location plan.
- Momentum: In 2025, the number of foreign projects was 9.3% below the previous year, and according to GTAI the planned investment volume almost halved. Worldwide, the number of projects fell by 9.5%, in the EU by 18.1%.
Suppose a Chinese industrial investor acquires a struggling German automotive supplier and relocates parts of production abroad. Sales, development and testing remain in Germany. New testing systems delivered by the end of 2027 qualify for declining-balance depreciation, and development projects may qualify for the research allowance. The timing of the acquisition therefore helps determine how much of this can be used.
What to do by the end of 2027
- Define the structure: your own GmbH, a holding or an acquisition – where appropriate, also out of insolvency.
- Clarify investment screening, before any contracts are signed.
- Check delivery times: For declining-balance depreciation, delivery by 31 December 2027 is what counts.
- Set up bookkeeping and reporting, so that headquarters can see the effect – see Understand Your German Subsidiary in 15 Minutes.
- Plan data and IT: see Data between China and Germany.
We handle these points as one concept: structure, bookkeeping and IT from a single source, the tax side with our partner tax firm TABAK Steuerberatung and, where needed, with partner firms in more than 20 countries.
We advise you in English — directly, without intermediaries.
Frequently Asked Questions
For declining-balance depreciation, does the order date or the delivery date count?
The delivery date. Under § 9a EStDV, the year of acquisition is the year of delivery. A machine ordered in 2027 and delivered in 2028 no longer falls under the rule.
Is trade tax falling too?
No. Trade tax is levied by the municipalities at their own multiplier. From 2027, the minimum multiplier is 280%. In Mannheim, it is 430%.
Are the new corporation tax rates certain?
They are current law: the Act of 14 July 2025 has been promulgated in the Federal Law Gazette. Future legislators can amend it, as with any law.
Does the research allowance cap apply to each group company?
No. For affiliated companies, the €12 million cap on the assessment base applies in total.
Is an investment worthwhile for tax reasons alone?
No. The incentives improve the return on a viable project. A project that does not stand up without them will not become viable because of them.
Sources
- § 23 KStG – tax rate
- § 7 EStG – depreciation for wear and tear
- BGBl. 2025 I Nr. 161 – Act on an Immediate Tax Investment Programme
- BMF: Wachstumsbooster (growth booster)
- § 3 FZulG – eligible expenses, assessment base
- § 16 GewStG – multiplier
- § 9b StromStG – tax relief for companies
- Eurostat: Electricity price statistics
- Eurostat: Population and population change statistics
- GTAI: FDI Report 2025, press release of 21 May 2026
More than 20 years advising entrepreneurs, investors and family businesses. Reserved tax services are provided by our partner tax firm, TABAK Steuerberatung.
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We plan the structure, timeline, bookkeeping and IT of your investment as one concept. The tax calculations are prepared by our partner tax firm TABAK Steuerberatung.