Tax changes in 2025/2026 for the real estate industry

Tax changes in 2025/2026 for the real estate industry | ASSETPHYSICS

The tax plans of the new federal government

On 9 April 2025, the new government partners presented their coalition agreement. It is entitled "Responsibility for Germany". The aim of the coalition is to promote a competitive, growing economy and at the same time strengthen social cohesion. Accordingly, the agreement contains measures for almost all sectors – including the real estate industry. The most important tax points for the industry are:

Area	Planned measures
Corporate taxes	Introduction of an "investment booster": declining-balance tax depreciation of 30% on "equipment investments" in 2025, 2026 and 2027 Reduction of corporate income tax in five steps from 1 January 2028 by one percentage point p.a. Retention of the solidarity surcharge Maintaining the global minimum tax, support for simplification Improvement of the option model (Sec. 1a Corporate Income Tax Act) and the preferential treatment of accumulation (Sec. 34a Income Tax Act) Combating the transfer of fictitious registered offices to trade tax havens Increase of the minimum trade tax rate from 200 to 280 % Commitment to an EU-wide uniform corporate tax base
Taxation of natural persons	Reduction of income tax for small and medium-sized incomes in the middle of the legislative period Retention of the solidarity surcharge Tax exemption from surcharges for overtime work in excess of the collectively agreed full-time work as well as tax relief for an employer's premium for the extension of working hours from part-time to full-time work Strengthening employee share ownership Tax incentive for more affordable renting
Other	Modernisation of the law on cooperatives and introduction of the legal form of a "company with tied assets" Tax deductibility of the costs for energy-efficient refurbishments of inherited real estate Reduction of tax bureaucracy, e.g., commitment to simplifying the tax system through typification, simplifications and lump sums

Table 1 - Selected tax-relevant contents of the coalition agreement

The changes to capital-based taxes discussed during the election campaign and in the exploratory talks – such as the introduction of a wealth tax or adjustments to inheritance and gift tax – have not found their way into the coalition agreement.

Economic Development Act

Since 10 September 2025, the draft of a law to promote private investment and the financial location ("Economic Development Act") has been available. It is based on the Future Financing Act and is intended to strengthen the competitiveness and attractiveness of Germany as a financial centre and to enable more investments in infrastructure and renewable energies. The tax measures that are particularly relevant for the real estate industry are:

Law	Planned measures
Increase in the maximum amount for the transfer of hidden reserves	Increase in the maximum amount for the transfer of hidden reserves from the sale of shares in corporations for reinvestments in Section 6b paragraph 10 of the Income Tax Act from the current EUR 500,000 to EUR 2,000,000. The increase in the maximum amount is to be applied for the first time to profits from the sale of shares in corporations that arose in financial years beginning after the day following the promulgation.
Investment Tax Act	Planned measures
Harmless active entrepreneurial management	According to the newly inserted Section 1 paragraph 2 sentence 2 of the Investment Tax Act, it is not to be detrimental to the qualification as an investment fund that an investment fund actively manages assets held on an entrepreneurial basis. In order to avoid distortions of competition, the taxation rules for investment funds and special investment funds are to be amended in such a way that income from active business management is excluded from corporate income tax and thus income taxation at fund level is ensured (amendments to Sections 8, 10 and 33 of the Investment Tax Act).
Income earned through partnerships	Pursuant to Section 6 paragraph 3 sentence 1 no. 3 of the Investment Tax Act, new version, domestic participation income is also to include income generated through a partnership. Only if the domestic participation income is attributable to the domestic permanent establishment of a commercial partnership is it allocated to other non-tax-exempt domestic income pursuant to Sec. 6 paragraph 5 sentence 2 of the Investment Tax Act, new version. In the case of commercially infected or commercially imprinted partnerships, Section 6 paragraph 5 sentence 3 of the Investment Tax Act opens up the possibility for the investment fund to prove that the income originates from asset management activities and can therefore be tax-exempt. Pursuant to Section 6 paragraph 4 sentence 1 no. 5 of the Investment Tax Act, new version, the domestic real estate income generated by an investment fund through participation in partnerships and which originates from an asset management activity or from a foreign permanent establishment of the partnership is to be allocated to domestic real estate income pursuant to Section 6 paragraph 4 of the Investment Tax Act. Section 6 paragraph 5a of the Investment Tax Act, new version, regulates cases in which it cannot be assumed that there is active entrepreneurial management (certain loans, participations in corporations, participations in partnerships engaged in asset management).
Exemption from trade tax liability	The amendment of Section 15 paragraph 2 sentence 2 of the Investment Tax Act is intended to extend the exemption from trade tax liability of investment funds to participations in certain companies, such as real estate companies and infrastructure project companies.
Changes to special investment funds	By amending Section 26 no. 4 letter h of the Investment Tax Act, special investment funds are to be allowed to acquire investment shares in all types of domestic or foreign investment funds in the future. Pursuant to Sec. 33 paragraph 4 sentence 3 of the Investment Tax Act, new version, a special investment fund is no longer to be exempt from its corporate income liability in the case of other domestic income pursuant to Section 6 paragraph 5 sentence 1 nos. 2 and 3 of the Investment Tax Act.

Table 3 - Overview of selected tax measures under the Economic Development Act

Irrespective of the tax relief, the definition of investment fund pursuant to Section 1 paragraph 1 Capital Investment Act remains the relevant limit for investment funds. According to this, funds are not allowed to carry out any operational activities outside the financial sector. For example, they still cannot operate a hotel themselves but only rent it out.

Future court decisions

Future tax changes can be triggered not only by legal changes, but also by court decisions. Two proceedings on the interest barrier and real estate transfer tax are particularly noteworthy:

Court case	Explanation
Unconstitutionality of the interest barrier	The interest barrier limits the tax deduction of interest expenses, even if they are actually incurred and paid to third parties such as banks. This limit means that taxpayers have to pay taxes on profits that they do not actually make. Since the introduction of the interest barrier, there has therefore been a discussion as to whether the regulation is constitutional. In its decision of 14 October 2015, I R 20/15, Federal Tax Gazette II 2017, p. 1240, the Federal Fiscal Court (BFH) suspended pending proceedings in which this question is material to the decision and referred the question to the Federal Constitutional Court (BVerfG) as to whether the interest barrier violates Article 3 of the constitution, as the Federal Fiscal Court is convinced that the provision is unconstitutional (case no. 2 BvL 1/16).
EU incompatibility of real estate transfer tax in restructuring	The EU Directive 2008/7/EC (Capital Accumulation Directive) prohibits any kind of indirect taxes or levies on corporate law transactions such as mergers, demergers or capital injections. The Directive is directly applicable law in Germany and must be observed by the administration and the national courts. In the proceedings pending before the Federal Fiscal Court (BFH) since 2023 under II R 8/23, the plaintiff invokes this directive and demands a comprehensive exemption of restructuring from real estate transfer tax that goes far beyond the group clause under Section 6a of the Real Estate Transfer Tax Act. In the meantime, the compatibility of real estate transfer tax with EU law in the event of restructuring is also being questioned in other EU countries. On 6 December 2024, a Portuguese court referred the matter to the European Court of Justice (ECJ) in a request for a preliminary ruling C-837/24, Nova Iberomoldes. If the ECJ answers the questions referred in the sense of the Portuguese court, corresponding German real estate transfer tax events could probably also be contrary to EU law.

Table 5 - Significant pending court cases

Tax action	Explanation
Capital repayments	Capital repayments by foreign corporations can be treated as repayments of equity rather than taxable dividends upon request. The application deadline for capital repayments made in 2024 expires on 31 December 2025 (if financial year = calendar year).
Increase in loss deduction for limited partners	Equity increase of a limited partnership before the end of the year in order to be able to take advantage of tax losses that exceed the equity.
Extended trade tax deduction	The conditions for the extended trade tax deduction must be met throughout the year. It should be examined whether the conditions are met from 1 January 2026 or whether measures are necessary before the end of the year.
Formation of tax-free reserves	Capital gains can be neutralised by tax-free reserves in accordance with Section 6b of the Income Tax Act.
Country-by-Country Reporting	The deadline for submitting reports in accordance with Section 138a General Fiscal Code expires on 31 December 2025 (if financial year = calendar year).

Tax changes in 2025/2026 for the real estate industry

What tax changes will the real estate industry face? This article gives you an overview of the changes and options for action at the end of the year.

The tax plans of the new federal government

Immediate Tax Investment Programme

Economic Development Act

Tax Amendment Act 2025

Future court decisions

Need for tax action at the turn of the year

#Newsletter: Stay up to date!

Related posts

Rent control and a look at Europe

The Munich real estate market in detail: new market report from Aigner Immobilien

Frankfurt real estate investment market: Significantly more sales processes, especially in secondary locations

Senior citizens' residence "Auf der Litten" in Essen successfully completed and contributed to special fund