Stückmann Podcast Episode 28: Reduction in corporation tax rates from 2028
In the HLB Stückmann podcast, Juliette Gill talks to Christian Hauptmann about the planned reduction in corporation tax rates from 2028 – and the far-reaching consequences for limited companies and partnerships. What initially sounds like a simple message – “Tax rates are falling” – turns out, on closer inspection, to be a complex shift in tax policy. In addition to the gradual reduction in corporation tax, depreciation rules, accounting implications, retention options and potential changes in legal form must be taken into account. This episode highlights the specific benefits that will arise, where the practical challenges lie, and why companies should start strategic planning today.
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Topics from the podcast:
Statutory Immediate Investment Programme: Depreciation and tax rate reduction
The basis for this is the “Act on an Immediate Tax Investment Programme to Strengthen Germany as a Business Location”, which was passed in July 2025. The aim is to encourage investment and strengthen the country’s competitiveness in the long term.
The Act provides for two coordinated measures:
Investment Booster (2025–2027)
Companies can once again claim a declining balance depreciation of up to 30 per cent on movable assets. This applies to acquisitions and production carried out between 1 July 2025 and 31 December 2027.
Reduction in corporation tax from 2028
From 2028, the corporation tax rate will be reduced by one percentage point each year – from the current 15 per cent to 10 per cent in 2032. Business rates will remain unchanged. Put simply, this means that the tax burden at company level will fall from around 30 per cent to approximately 25 per cent in future.
Already relevant today: deferred taxes and planning requirements
Although the tax rate reduction will not take effect until 2028, it must already be taken into account in financial reporting. The tax rates that will apply in the future are decisive when calculating deferred taxes. Companies must therefore forecast when valuation differences will reverse and apply the corporation tax rate in force at that time. This is already leading to adjustments in annual financial statements and increased planning efforts.
A comparison of the tax burdens of partnerships
The situation is more nuanced for partnerships. Under standard taxation, profits are subject to the partners’ personal income tax rate, which is around 45 per cent at the top end, plus the solidarity surcharge. Whilst partnerships have often been taxed slightly more favourably than fully distributing corporations in the past, this relationship may be reversed in future. This will consequently create a structural tax disadvantage for standard-taxed partnerships.
Tax advantages for reinvestment and conversion options
One option for alignment is the retained earnings relief under Section 34a of the Income Tax Act (EStG). Undistributed profits can be taxed at a preferential rate, which is currently 28.25 per cent and is also set to fall to 25 per cent by 2032. This would bring it into line with the future corporation tax rate.
However, the scheme is complex: each shareholder must submit an individual application, special catch-up tax calculations must be kept, and subsequent withdrawals may trigger an additional tax liability. Restructuring may also be made more difficult.
Alternatively, a switch to corporation tax may be considered – either by converting the partnership into a limited liability company (GmbH) or by submitting an application under Section 1a of the Corporation Tax Act (KStG), whereby the partnership is treated for tax purposes as a corporation. In principle, such a move can be made on a tax-neutral basis, subject to certain conditions.
Nevertheless, issues such as outstanding back-tax liabilities, lock-in periods, special business assets or the utilisation of losses must be carefully examined. Preparatory measures are often necessary, particularly in the case of established structures.
Conclusion: Set the course now
The reform makes limited companies more attractive from a tax perspective and puts partnerships under pressure to act. Whether it makes sense to retain profits or switch to corporation tax depends on the individual company structure, the allocation of profits and the long-term strategy.
Our approach is therefore as follows: rather than waiting until 2028 or 2032, we recommend assessing today how your company’s structure can be optimised for tax purposes in the future. We would be happy to assist you with this.
