The coalition agreement between the CDU/CSU and SPD from an investor's perspective

Germany elected a new federal government on February 23, 2025. On April 9, the coalition partners CDU, CSU and SPD agreed on a coalition agreement, which was accepted by all three parties and their members this week. This means that nothing stands in the way of Friedrich Merz (CDU) becoming Chancellor. He is expected to be sworn in on May 6. The plans of the new governing coalition clearly bear the signature of the Social Democrats and contain many potential changes that are to be implemented in the coming legislative period. These include some plans that affect us investors.

Minor tax relief planned

First things first: taxes for small and medium incomes are to be reduced in future. But to what extent remains a matter for negotiation, although the changes are not due to come until “the middle of the legislative period” and therefore not before 2027. What is certain, however, is that the solidarity contribution, which is now completely decoupled from its original idea, is to remain in place. However, it will not only affect top earners, but also every small saver and investor via capital gains.

From January 1, 2026, the VAT rate on meals is to be permanently reduced from 19% to 7%. Whether this will actually make restaurant visits cheaper remains questionable, as there is no obligation to pass on the tax savings to customers. If prices remain the same, restaurateurs could increase their profits by around 12%, which would be understandable, especially after the coronavirus period.

From 2028 at the latest, the corporation tax rate is to be reduced by one percentage point per year over five years from the current 15% to 10% in order to ease the burden on companies. In addition, the next government wants to examine which companies should be subject to this type of tax regardless of their legal form and wants to simplify the rules.

Only time will tell whether this is perhaps a little too late given the current economic slowdown. In some cases, however, tradespeople could also have to pay higher taxes, as the coalition agreement provides for a minimum rate of 280 for municipalities this year.

Der Koalitionsvertrag2025Der Koalitionsvertrag2025

Higher incentives for overtime

Those who want to work more and longer will be able to do so with tax benefits in future. Pensioners who continue to work beyond the normal retirement age will be able to earn up to 2,000 euros a month tax-free. Overtime bonuses are to become completely tax-free for full-time employees. However, this change does not apply to part-time employees or even minimum wage earners. Self-employed persons and freelancers are not included at all. The minimum wage is to rise – decreed by the responsible commission.

Shortly after taking office, the CDU/CSU and SPD want to reduce the electricity tax to the “European minimum” and lower levies and grid fees. This could reduce the price of electricity by around 2.5 to 3.5 ct/kWh in the short term. In addition, a special industrial price for energy-intensive companies is to be introduced and the gas storage levy abolished, which could save heating customers around 0.35 ct/kWh.

In order to promote the sale of more climate-friendly vehicles, there are to be three tax concessions for buyers of electric vehicles: electric vehicles are to remain exempt from vehicle tax until 2035 and anyone who receives an electric company car from their employer can treat themselves to one for a purchase value of up to 100,000 euros in order to receive the full tax concessions. However, there will be no climate money.

From next year, all commuters will be able to enjoy an increased commuting allowance and it will also be made easier. In future, taxpayers will be able to claim EUR 0.38 for their commute from the first kilometer, which previously only applied from the 21st kilometer to the first place of work.

Changes to pensions

The new government wants to fix the pension level at 48% for the time being until 2030, but without tackling the actual problem. The statutory retirement age of 67 will remain in place. Nevertheless, there is to be a so-called “early start pension” from January 1, 2026. Children from the age of six until they reach the age of majority will then receive ten euros per month in an individual, funded and privately organized retirement savings account during the time they attend an educational institution in Germany. The amount generated is then blocked until retirement and can be saved further through private contributions up to an annual, undisclosed maximum amount. All earnings are then to remain tax-free.

The law to introduce a share pension or generational capital would already have been ready and would only have had to be passed by the traffic light government. However, the government collapsed when the finance minister was thrown out and with it the idea. The grand coalition will not stick to it.

Overall, the coalition agreement remains vague in many places and often does not provide any precise figures or details. It remains to be seen what will actually be implemented.

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