Content
- Tax plans of the new German coalition/Government
- Changes in the Foreign Trade and Payments Ordinance (AWV)
- Stricter requirements for earn-out clauses in Germany
- Tax implications for influencers
- Online verification of EU VAT Numbers only, starting July 2025
Tax plans of the new German coalition/Government
After the elections held in February 2025 a new government has been formed which consists of two parties: the conservatives (CDU) as the bigger one with the new chancellor Merz as the leading figure and the social democrats (SPD).
As a first initiative the coalition agreed on an immediate tax investment program to strengthen Germany as a business location. The immediate action program can be taken from a bill dated 4th. June 2025 that still needs approval of the parliament and includes:
- Re-introduction and increase of declining balance depreciation for movable assets of fixed assets – “investment booster”. The declining balance method of depreciation can be used instead of the straight-line method for movable fixed assets that were acquired or manufactured after 30.06.2025 and before 01.01.2028. The percentage rate to be applied may be a maximum of three times the percentage rate applicable to straight-line depreciation and may not exceed 30%.
- Gradual reduction of the corporation tax rate from 01.01.2028 by one percentage point each year to 10% from the 2032 assessment period
- Reduction of the retention tax rate to provide equivalent relief for profits not withdrawn by entrepreneurs from the current 28.25 percent in three stages to 27 percent (assessment period (FY) 2028/2029), 26 percent (FY 2030/2031) and 25 percent (from FY 2032),
- Introduction of arithmetic-degressive depreciation for newly purchased electric vehicles. The regulation is intended to introduce arithmetic-degressive depreciation for newly acquired, purely electrically powered vehicles with decreasing graduated rates of 75% in the year of acquisition, 10% in the first subsequent year, 5% in the second subsequent year, 5% in the third subsequent year, 3% in the fourth subsequent year and 2% in the fifth subsequent year. The regulation only applies to newly purchased, purely electrically powered vehicles. It will be introduced temporarily for purchases in the period from July 2025 to December 2027. The temporary limit provides incentives for swift investment decisions.
- Increase in the gross list price limit for the so-called company car tax for the preferential treatment of electric vehicles to €100,000 (now €70,000). This is to apply for the first time to vehicles purchased after 30.06.2025
- Extension of the Research Allowance Act. With the aim of making tax incentives for research even more attractive, the research allowance is to be extended to additional overheads and other operating costs if these eligible expenses were incurred as part of a research and development project eligible for tax incentives, which began after December 31, 2025. The overheads and other operating costs are recognized exclusively in the form of a lump sum of 20% of the eligible expenses incurred in the financial year in accordance with paragraphs 1, 2, 3, 3a and 4. Individual recognition of costs is not possible. However, the chosen system means that these costs do not have to be verified in detail. This does not further complicate the procedure and avoids an increase in bureaucracy. In order to additionally support the extension of eligible expenses to other overheads and operating costs, the maximum assessment basis for eligible expenses incurred after 31.12.2025 is to be increased to €12 million
They have announced the following further measures to be implemented later on if funding is secured.
Corporate taxation
- Increase in the minimum trade tax rate from 200% to 280% and adoption of administrative measures against “sham relocations to trade tax havens”
- Adherence to the global minimum tax, Support work at international level to permanently simplify it, avoid disadvantaging German companies in international competition
- Commitment to a uniform assessment basis for corporate tax in the EU
Individual Income taxation
- Income tax relief for small and medium-sized incomes in the middle of the legislative period
- Increase in the commuter allowance to 38 cents permanently from the first kilometre as of 01/01/2026
- Tax exemption for overtime bonuses
- Reduction of electricity tax “for all” to the European minimum and reduction of transmission grid fees
Other topics
- Innovation boost for the economy with “start-up protection zone”, simplification of notarial procedures and digital certification processes as well as automatic data exchange between the notary’s office, tax office and trade office as a complete “one-stop store” and company foundation shall be possible within 24 hours
- Support for a financial transaction tax at European level
- Vehicle tax exemption for electric cars until 2035
- Reduction of aviation-specific taxes, fees and charges and reversal of the increase in air traffic tax.
Changes in the Foreign Trade and Payments Ordinance (AWV)
This is to inform you about changes/facilitations in the Foreign Trade and Payments Ordinance (AWV), which came into force on January 1, 2025. The Foreign Trade and Payments Ordinance (AWV) contains various reporting obligations in cross-border capital and payment transactions to the Deutsche Bundesbank. These serve to statistically record relevant transactions as well as receivables and assets for Germany’s balance of payments.
Who is affected?
This affects residents, i.e. domestic (i.e. German) private individuals, commercial enterprises, public bodies and financial institutions. Residents in this context are private individuals who have a residence in Germany or usually stay in Germany most of the time per year, no matter what nationality they have. For example, a German who has been living abroad for more than one year is to be regarded as a “non-resident”, whereas a foreign national who has been living in Germany for more than one year is to be regarded as a “resident”. A subsidiary of a foreign company is also affected if its legal seat or the place of management is in Germany
Confidentiality and fines in case of non-compliance
The Deutsche Bundesbank is obliged to keep all individual data strictly confidential. Individual details may neither be published nor passed on to other bodies, e.g. tax offices. Violations of the reporting obligations are administrative offenses that can be punished with fines of up to EUR 30,000 in accordance with Section 19 (6) of the Foreign Trade and Payments Act (AWG).
Increase in the reporting thresholds for foreign payments
Residents now only have to report foreign payments to the German Bundesbank from 50,000 euros (previously 12,500 euros). This applies to both incoming and outgoing payments. Interest payments for foreign bonds and money market instruments are now completely exempt from the reporting obligation. Payments for the granting, taking out or repayment of loans with a maximum term of twelve months and payments for the import, export or transfer of goods are still not subject to reporting requirements.
Reporting obligations for existing assets
Reporting obligations for existing assets, receivables and encumbrances remain in place. However, claims and sales now only have to be reported from EUR 6 million (previously EUR 5 million). The assets of residents abroad or foreigners in Germany must be reported if the sum of foreign receivables or the sum of foreign liabilities exceeds EUR 6 million at the end of a month. In this respect, the threshold has been doubled; previously, assets amounting to EUR 3 million had to be reported. In addition, the previously optional information on the balance sheet total, annual turnover and number of employees is now confirmed for German groups. Cross-border shareholdings of German residents must be reported if the share of capital or voting rights is 10% or more and the investment object exceeds a balance sheet total of €6 million (or the equivalent if reported in another currency).
Obligation to report crypto assets
Cryptocurrencies are now also explicitly included in the reporting obligations in order to avoid ambiguity. Although such transactions were already considered reportable in certain cases before the amendment, the clarification is intended to provide additional transparency and avoid time-consuming queries. Four new codes (804, 814, 824 and 834) have also been introduced to ensure a more precise allocation of crypto assets to balance of payments items.
Further information can be found here: FAQ and notices | Deutsche Bundesbank
Stricter requirements for earn-out clauses in Germany
It has become popular to agree on earn-out clauses in company purchase agreements as this creates a win-win situation for the vendor as well as the buyer. An earn-out clause means that the purchase price for a sole proprietorship or a co-entrepreneurial share or a share in a corporation is subsequently increased if the acquirer exceeds a predetermined turnover or profit limit is exceeded.
Court decision
In a decision in 2023 the superior fiscal court in Germany (BFH) has ruled that there is no retroactive increase in capital gains if the purchase price increase is uncertain in terms of reason and amount.
Example:
The purchase price for a partnership share is increased if the gross profit of the acquirer exceeds € 5 million, but by a maximum of € 500,000.
As this is uncertain in terms of reason and amount, there is no retroactive effect.
Why could this be disadvantageous for the seller?
The seller may profit from tax exemptions or tax allowances of the sales price such as those mentioned in sec. 16 or 17 of the Income Tax Act or the quintile rule in section 34. Those usually do not apply to retroactive payments in the future. As a consequence, the seller may have tax disadvantages. However, if the seller is a private individual he or she may be in a lower tax bracket, when receiving the final payment so the individual situation of the parties involved has to be taken into consideration.
Why could this be disadvantageous for the purchaser?
If the purchaser is able to depreciate the acquisition costs or a part of them, he will only be able to depreciate the additional payment from the earn-out-clause later.
What could you do to avoid the retroactive effect?
The court decision did not cover the case, if the purchase price increase depends on exceeding a turnover or profit threshold, but the amount of the increase is certain. We therefore assume that in this case the increase is still a retroactive event 175 para. 1 sentence 1 of the German Fiscal Tax Code and will therefore be a subsequent increase in the privileged capital gain and avoid the negative tax consequences. However, there is no certainty about that, but it is a chance.
Tax implications for influencers
Many young people today would prefer to earn their money with social media. Some influencers earn very well, and the question arises when this activity becomes taxable. In order to answer that question, one needs to look at income tax differentiation as well as VAT aspects. In some cases, criminal tax law also comes into play.
First of all one needs to qualify the type of income, i.e. trade income, which triggers trade tax or self-employment, which does not trigger trade tax. In most cases the income will be qualified as trade income as the activity is carried out commercially and the influencer does not meet the criteria of self-employment in section 18 EStG (German Income Tax Act) as they do not have a corresponding professional qualification like a doctor, lawyer or chartered accountant for their work.
Typical case groups of those who earn trade income are:
- Affiliate-Links, i.e. influencers receive commissions for every sale generated via their affiliate links. If followers use this link to go to the corresponding homepage of the advertising partner or buy a corresponding product, influencers receive a previously agreed commission.
- Revenue via YouTube, i.e. income is generated, for example, through advertisements in videos on the YouTube platform. This is done, for example, by placing advertisements before, between or during the content provided by influencers.
- Income from live streaming activities, sponsorship and partnerships are also sources of revenue. Sponsorship and partnerships are collaborations between influencers and, in some cases, established brands to promote products or services.
- Influencers are often provided with products so that they can share their experiences with the products on social media. Reporting on services and their use is also revenue.
- The sale of own products by influencers or consulting activities, such as life coaching or financial tips, can also be considered as a source of income.
All income generated by the above-mentioned case groups of income is taxable. This also includes products or services they get for free. Typical operating expenses include the cost of office equipment, travel expenses, rental and leasing costs and license fees.
It is usually difficult to differentiate between private and business-related costs, that are tax-deductible. The two areas are often intertwined or merge into one another. If there is no appropriate allocation standard, such as in the case of expenses for food, clothing and health, it is not possible to split the costs for private and professional expenses, so that the deduction prohibition under Section 12 No. 1 EStG often applies.
Expenses for civilian clothing of an influencer are not deductible as business expenses even if they are worn exclusively for professional purposes. Only expenses for typical professional clothing that cannot also be worn for private occasions are deductible as business expenses. Travel costs can be tax deductible if and, in the amount, they are business related, i.e. in connection with potential or real income.
The costs for the acquisition of an Internet domain are to be capitalized as intangible assets. They cannot be amortized as they are a non-depreciable asset.
VAT only arises if influencers carry out a commercial or professional activity independently and sustainably. This is often only the case for full-time influencers or when income is then generated by the influencer’s activities. When influencers receive products for their activities, this often constitutes an exchange or an exchange-like transaction because the influencer must provide certain services in return. However, as in most cases there are no gratuitous benefits, these are not gifts. The assessment basis for the VAT in these cases is the fair market value of the products received.
If Vouchers for bookkeeping are incomplete or inadequate, the general statutory recording and retention obligations are not met, or the influencer fails to cooperate with the tax authorities this may lead to estimates of tax bases and therefore to assessment notices. If they are entrepreneurs and do not ask an expert if what they do is taxable or not, may commit tax evasion unknowingly or intentionally, for example by providing incorrect or incomplete information or by failing to provide the necessary information.
What is often disregarded is that the commercializable part of the naming right of a natural person may have constituted an intangible asset with a substantial value based on future income of e.g. the next 10 years. When influencers decide to give up their German residence the tax authorities will assume a cessation of trade operations in Germany with the effect of disclosure of hidden reserves in the moment they leave. A fiscal court has just ruled that they want to recognize the self-created commercializable part of the right of ownership in the relinquishment balance sheet at its fair value at the time of relinquishment. This may trigger huge taxable profits and the influencer may not be able to pay the taxes as he had no real income in this amount at the time leaving Germany.
Recommendation:
Influencers should seek tax advise at an early stage, i.e. when they start to invest money in or earn money with their activity. They should keep all activity-related receipts from the start of their activities and document what they have purchased. When they think about leaving Germany and moving to e.g. a low-tax country, getting tax advice beforehand is also inevitable.
Online verification of EU VAT Numbers only, starting July 2025
According to a circular issued by the German Federal Ministry of Finance (BMF) on June 6, 2025, an important change will take place regarding the verification of foreign EU VAT identification numbers (VAT IDs):
As of July 20, 2025, it will no longer be possible to obtain confirmation of VAT numbers from the Federal Central Tax Office (BZSt) via telephone or in writing.
Background:
Using a valid VAT ID is a key requirement for VAT-exempt cross-border supplies and services within the EU – particularly for:
- Intra-Community supplies (§ 6a of the German VAT Act – UStG),
- Triangular transactions (§ 25b UStG),
- and for platform operators (§ 22f in conjunction with § 25e UStG).
To safeguard the VAT exemption, German entrepreneurs can request an official qualified confirmation from the BZSt under § 18e no. 1 UStG – including the name and address of the entrepreneur to whom the VAT ID was issued in another Member State.
What’s changing?
- From July 20, 2025: Verifications will be exclusively available via the BZSt’s online portal.
- The option to submit written requests – for example, together with the application for a German VAT ID – will no longer be available.
- A German VAT ID must already be available in order to use the online service – early application is recommended.
- The portal will continue to support:
- Single queries, and
- Bulk queries (via XML interface).
Note for our clients:
Businesses should ensure their internal processes for verifying EU VAT IDs are adapted to the online system in time. This is especially important for platform operators, distance sellers, and software providers who rely on automated checks.
E-Invoicing in Germany
Sentiment after the first three months
Since January 1, 2025, approximately 3.5 million businesses based in Germany have been required to accept electronic invoices (e-invoices) issued by domestic suppliers. This transition is part of Germany’s broader push toward the digitalization of invoicing processes.
Key Insights from Practice:
- Many businesses currently receive only a small number of e-invoices each month.
- A significant share of these still fails to fully comply with legal requirements.
- A notable increase in e-invoicing volumes is expected to start mid-2026, ahead of the mandatory issuance requirement from January 1, 2027.
- Implementing a legally compliant e-invoicing process usually takes at least three months.
- Companies report a high need for employee training and adjustments in IT and accounting systems.
Recommendation:
Businesses should begin to address the technical and organizational requirements early and ideally start implementation by the end of 2025 to ensure timely compliance.
