Germany: Draft legislation including various amendments to tax law

Draft Tax Amendment Act 2025

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october 15, 2025

The government submitted the draft Tax Amendment Act 2025 to the upper house of Parliament (Federal Council or Bundesrat). The law is intended to implement further tax law changes from the immediate action program for Germany adopted by the coalition committee on May 28, 2025, as well as other necessary short-term changes.

The law includes the following measures:

  • Increase in the travel allowance to €.38 from the first kilometer and permanent extension of the mobility bonus (Section 9 (1) Sentence 3 and Section 101 Sentence 1 of the Draft Income Tax Act)—effective January 1, 2026
  • Updated references to the de minimis regulation for the special depreciation for new rental housing construction (Section 7b (5) of the Draft Income Tax Act) and the research allowance (Section 9 (5) of the Draft Federal Tax Allowance Act)—effective the day after promulgation
  • Reduction in value added tax (VAT) to 7% for restaurant and catering services (with an exception for sale of beverages) (Section 12 (2) Number 15 of the Draft VAT Act)—effective January 1, 2026
  • Notification of notice by making data available for retrieval in the input tax refund procedure (Section 18g, Sentence 5 of the Draft VAT Act)—effective January 1, 2026
  • Special regulation for the use of central customs clearance (CCI) (Section 21b – new – Draft VAT Act)—effective January 1, 2026
  • Various changes regarding non-profit status

Read a July 2025 report (German) prepared by the KPMG member firm in Germany

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