The new German government appears to be rushing to launch the first subsidy measures for electric vehicles again. As part of a larger package, electric cars are to be made more attractive for companies. Special depreciation allowances are expected to be available from July.
This is the result of a draft bill from the German Federal Ministry of Finance (BMF) by Lars Klingbeil (SPD), which several local media outlets, including Handelsblatt, Tagesschau, and DPA, recently quoted.
To make the purchase of electric vehicles more attractive from a tax perspective, a 75 percent depreciation allowance will apply to newly purchased, purely electrically powered vehicles in the first year of purchase. In the year following the purchase, a 10% deduction could be applied, followed by 5% in the second and third years, 3% in the fourth year, and 2% in the fifth year, according to media reports.
This would provide clear tax incentives, particularly for the market ramp-up of electromobility in the business sector in Germany, according to the draft bill. The timetable is ambitious: although it is currently still a draft bill, the special regulation is to apply to electric vehicles purchased between July 2025 and December 2027, the law would therefore have to be passed very soon. The draft is to be presented to the cabinet today, on the 4th of June.
‘New economic growth’
To quickly tackle some of the most critical projects from the government’s perspective, the black-red coalition led by Friedrich Merz (CDU) recently presented an “immediate action programme of the federal government” to adopt the budgets for 2025 and 2026 swiftly and to get the medium-term financial planning for 2026-2029 off the ground.
In the ‘New economic growth’ chapter, the programme already announced tax incentives for electromobility and, under ‘Simplification and acceleration’, an “acceleration of approval procedures for hydrogen infrastructure”. The long-promoted simplification of authorisation procedures for the construction of charging infrastructure is not mentioned.
Purely electrically powered vehicles are explicitly mentioned in the text. The special depreciation allowance should therefore not only apply to electric cars, but also to commercial vehicles, trucks, and buses. In fact, the coalition agreement between the CDU/CSU and SPD already referred to ‘e-vehicles’ when talking about special depreciation, not just electric cars. There have been no details yet on the exact structure of the special depreciation allowance.
eMobility funding
In the coalition agreement, the parties listed a total of nine measures, ranging from an increase in the gross price limit for tax relief on company cars, an extension of the motor vehicle tax exemption for electric cars until 2035, a program for households with low and medium incomes, to the promotion of a hydrogen charging infrastructure for commercial vehicles.
The planned purchase premium for electric cars, which was still included in one of the working papers of the responsible negotiating group with a placeholder for the amount, did not make it into the final coalition agreement.
The special depreciation for electric vehicles will not be introduced separately, but as part of comprehensive tax cuts for companies, such as a reduction in corporation tax and a so-called ‘investment booster’ with a depreciation of 30% for investments in movable assets.
According to the draft bill, the planned measures are intended to provide a “quick boost to growth-generating investments” on the one hand and “contribute to the long-term stabilisation of expectations” on the other, according to the Tagesschau. For the period from 2025 to 2029, the total relief amounts to €48 billion.
As the reduced tax revenue from the package will affect the federal government as well as the federal states and local authorities, the Federal Council (German Bundesrat) will also have to approve the law, even if the cabinet adopts the draft without any changes. It is not yet known whether there is a majority in favor of the plan in the state chamber.
