Short answer: Start by identifying whether a measure permanently reduces recurring tax or merely changes when a deduction is recognised. A lower municipal business-tax multiplier can affect annual tax if the business location is genuine and supportable. Declining-balance and electric-vehicle depreciation mainly accelerate deductions. The R&D tax allowance is a separate incentive for qualifying work.
Four 2026 levers at a glance
| Lever | Available in 2026? | Main effect |
|---|---|---|
| Municipal business-tax multiplier | Yes | Potential recurring saving |
| Declining-balance depreciation up to 30% | Yes | Earlier deduction and liquidity |
| 75% first-year EV depreciation | Yes | Large first-year deduction |
| R&D tax allowance | Yes | Tax incentive for qualifying R&D |
1. Local municipal business tax: the recurring structural lever
German municipal business tax is calculated, in simplified form, from taxable business income, the 3.5% base rate and the municipal multiplier. Berlin publishes 410%, while Schönefeld publishes 240% for 2026.
Example using €250,000 of taxable business income
| Location | Multiplier | Simplified municipal business tax |
|---|---|---|
| Berlin | 410% | €35,875 |
| Schönefeld 2026 | 240% | €21,000 |
| Calculated difference | 170 points | €14,875 per year |
The example excludes additions, reductions, losses and allocation between multiple permanent establishments. Use our municipal business-tax calculator for another amount.
An address alone does not move management. Actual board decisions, usable premises, operating activity and any other locations matter. Our guide to permanent-establishment recognition explains the distinction.
2. Declining-balance depreciation up to 30%
For qualifying movable fixed assets acquired or produced after 30 June 2025 and before 1 January 2028, section 7(2) of the Income Tax Act permits declining-balance depreciation. The rate is capped at three times the straight-line rate and 30%.
For a €100,000 machine with an assumed ten-year useful life, straight-line depreciation is €10,000 for a full year. The declining-balance method can allow up to €30,000 in the first full year. The €20,000 difference is an earlier deduction, not an extra total deduction.
3. New electric vehicles: 75% in year one
Section 7(2a) provides a 75%, 10%, 5%, 5%, 3% and 2% schedule for qualifying new electric vehicles in fixed assets. The acquisition window also runs from after 30 June 2025 to before 1 January 2028. The cash-flow effect can be substantial, but it should support an economically necessary vehicle purchase rather than cause one.
4. R&D tax allowance: an incentive, not just timing
Qualifying software, product and process development may be eligible when the statutory research criteria are met. For eligible expenditure arising after 31 December 2025, the assessment base rises to as much as €12 million. The standard allowance is 25%; eligible SMEs may apply for a ten-percentage-point uplift. Technical uncertainty, planned work, staff time and costs need contemporaneous documentation.
What does not reduce 2026 tax: the corporate-rate cut
The German corporate tax rate remains 15% through 2027. The statutory reduction starts in 2028, falls by one percentage point per year and reaches 10% from 2032. That timeline may influence long-range planning but is not a 2026 saving.
A practical order of work
- Map actual management, permanent establishments and municipal multipliers.
- Model straight-line and accelerated depreciation for investments already justified by the business.
- Document potentially eligible R&D projects while the work is happening.
- Separate permanent savings, timing effects, incentives and implementation costs.
- Review tax, corporate-law and operational consequences with the relevant advisers before acting.
