Finance Committee Discusses the 2026 Annual Tax Act
On 2 November 2026, the Finanzausschuss des Deutschen Bundestages (Finance Committee of the German Bundestag) held a public hearing on the Federal Government’s draft 2026 Annual Tax Act. Several experts and associations expressed serious concerns about individual provisions.
The Federal Government had submitted the draft to the Bundestag on 30 September 2026. It was published as Bundestagsdrucksache 21/8283 (Bundestag printed paper 21/8283). The Bundesrat had previously issued its opinion at its meeting on 25 September 2026 pursuant to Art. 76 Abs. 2 GG (German Basic Law). The legislative process has not yet been concluded, and no final decision has yet been made on the provisions discussed.
Tax-Free Premiums for Working Special Hours
Trade Union Warns of Reduced Tax Relief
One of the main topics of the hearing was the proposed tax treatment of premiums for Sunday, public holiday and night work. The Deutsche Gewerkschaftsbund warned against restricting the tax exemption for these remuneration components.
In the association’s view, the Bundestag and the Federal Government should not give the impression that they intend to reduce tax-free premiums for employees in particularly demanding occupations who work such hours. The criticism concerned the revised definition of basic pay proposed in the 2026 Annual Tax Act.
Business Associations Anticipate Additional Administrative Burdens
Germany’s leading business associations were also critical of the proposed provision. It could force companies to amend contractual arrangements at considerable expense if they wished to compensate for a reduction in tax-free salary components. The associations therefore fear an additional increase in bureaucracy.
The Bundesverband der Lohnsteuerhilfevereine stated that the tax-free threshold could be exceeded more quickly under the new provision. As a result, premiums for Sunday, public holiday and night work would remain tax-free to a lesser extent. In its view, employees should not be burdened by a reduction in tax-free premiums, particularly given the shortage of skilled workers.
Criticism of Additional Reporting and Certification Duties
Several associations opposed the proposed collection of additional information for the annual wage tax certificate. The Bund der Steuerzahler objected that companies would be required to collect data that would then frequently not be analysed.
The Deutsche Steuerberaterverband was critical of the growing burden created by further cooperation and data transmission obligations. In the association’s assessment, the government draft continues this trend. The Bundesvereinigung der Deutschen Arbeitgeberverbände also criticised the administrative burden associated with additional reporting and certification duties for employers.
Objections to Changes in Travel Expense Tax Law
First Place of Work After Just 24 Months
The hearing also addressed proposed changes to the tax rules governing travel expenses. The period after which a first place of work is deemed to exist is to be reduced from 48 to 24 months.
The Bund der Steuerzahler believes that this could result in significant disadvantages for employees. Many employees could lose the more favourable tax treatment applicable to off-site work. The association attributed the proposed change to what it considers a purely fiscal interest.
The Deutsche Gewerkschaftsbund also opposed the shorter period. The Bundesverband der Lohnsteuerhilfevereine stated that the following groups of employees in particular could be affected:
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Professional and fixed-term military personnel could be affected by the tax consequences of the shorter assignment period.
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Employees in the construction industry could also be affected by the change.
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Employees could face new classification issues when determining their first place of work.
In the view of the Bundesverband der Lohnsteuerhilfevereine, the existing provision has proven effective.
Associations Call for Stronger Measures to Combat Tax Revenue Losses
The Deutsche Steuer-Gewerkschaft criticised the fact that organised VAT fraud was not addressed in the draft legislation. It described this as the greatest unresolved problem in tax enforcement. The resulting annual loss of tax revenue also undermines confidence in the fair enforcement of tax laws.
According to its statement, more decisive legislative action is required in this area in particular. However, the draft does not make use of this opportunity.
An expert from the Tax Justice Network also called for more far-reaching measures against tax avoidance by multinational corporations. In her assessment, Germany could generate at least an additional EUR 15 billion annually if corporate profits were taxed where the relevant economic activity actually takes place rather than in countries with particularly low tax rates. This amount would exceed the approximately EUR 11 billion that the Federal Government intends to achieve through spending cuts and other savings in the 2027 federal budget.
Higher Interest on Additional Tax Payments and Refunds
Rate Set to Double from January 2027
The government draft also provides for an increase in interest on additional tax payments and refunds. Interest on additional tax payments accrues where taxpayers are required to pay further tax. By contrast, interest on refunds is paid when tax is refunded.
Since 2019, the interest rate has been 0.15 per cent per month and thus 1.8 per cent per year. For interest periods beginning on or after 1 January 2027, it is to rise to 0.3 per cent per month, or 3.6 per cent per year.
The Bundessteuerberaterkammer expressed dissatisfaction with this selective amendment. In its view, the legislature should comprehensively reform the tax interest rules. Adjusting individual categories of interest is not sufficient.
VAT Grouping and Legal Certainty
At the hearing, one expert addressed details of the proposed VAT grouping regime. The government draft provides for the new rules in § 2c UStG-E (draft German Value Added Tax Act) to be introduced on 1 January 2030.
The expert advocated amendments to the draft. In particular, on grounds of legal certainty, he opposed retroactive consequences where the requirements for integration into the VAT group were not met.
Tax Amendments Remain Under Discussion
The statements illustrate that individual elements of the 2026 Annual Tax Act could have significant implications for employers, employees and taxpayers. The principal issues are the scope of tax-free premiums, additional data obligations, the treatment of work-related off-site assignments and the proposed doubling of interest on additional tax payments and refunds. Whether the contested provisions will be adopted, and in what form, depends on the further course of the legislative process.
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