Federal Council approves tax rate change

The main contents of the law include:

• Investment booster: reintroduction and increase of declining balance depreciation,
• expansion of the research allowance,
• Gradual reduction of the corporate tax rate from 15 percent to ten percent in five steps of 1 percentage point each from the 2028 to 2032 assessment period.

The tax rate change has a direct impact on consolidated, annual and interim financial statements that are still open. Following approval by the Bundesrat, a tax rate is deemed to have been substantively enacted in Germany.

• Deferred taxes are measured using the tax rate that is expected to apply at the time of the reversal of temporary differences or the utilization of loss and interest carryforwards and that has been enacted by the balance sheet date (on or after July 11, 2025).
• For balance sheet dates before July 11, 2025, the new tax rates are not to be included in the measurement of deferred taxes, but the effects of the tax rate change are to be recognized in the respective notes as an event after the balance sheet date.

The draft bill in the version submitted to the Federal Council can be found here.

A more detailed description of the effects of the tax rate changes on the financial statements will be provided in the July/August 2025 issue of Accounting News, which is expected to be published on July 15, 2025.