Bundestag debates draft tax legislation for 2026 and 2027
At its 99th sitting on 8 October 2026, the Deutscher Bundestag (German Federal Parliament) dealt in a first reading with two tax law legislative projects introduced by the Bundesregierung (Federal Government). The matters under discussion were the draft Einkommensteuerreformgesetz 2027 (2027 Income Tax Reform Act) on Bundestagsdrucksache 21/8235 (Bundestag printed paper 21/8235) and the draft Jahressteuergesetz 2026 (2026 Annual Tax Act) on Bundestagsdrucksache 21/8283. Following the debate, both bills were referred to the committees; in each case, the Finanzausschuss (Finance Committee) has lead responsibility.
Einkommensteuerreformgesetz 2027 in first reading
Federal Government draft dated 28 September 2026
The draft Einkommensteuerreformgesetz 2027 is dated 28 September 2026. It was introduced by the Federal Government and debated in the Bundestag in its first reading. After the one-hour debate, it was referred to the committees, with the Finance Committee assuming lead consideration.
According to the available information, the Act is intended to enter into force on 1 January 2027. The project requires approval, meaning that the Bundesrat (Federal Council) must also be involved in the further legislative procedure. Amendments in the parliamentary procedure and in the Bundesrat procedure therefore remain possible.
Planned tax relief and counter-financing
The political debate centred on the planned income tax relief. In the debate, Federal Finance Minister Lars Klingbeil referred to gross relief of ten billion euros for low and middle incomes in the years 2027 and 2028.
According to the available information, the following measures, among others, are planned for counter-financing:
- The tax reduction for craftsmen’s services is to be lowered from 20 per cent to 15 per cent.
- The maximum amount for this tax reduction is to fall from EUR 1,200 to EUR 900.
- The flat-rate tax for mini-jobs is to rise from 2 per cent to 5 per cent.
To counter-finance the measures, the draft primarily provides for a higher top rate of income tax (full annual effect according to the financial table: around EUR 2.4 billion from 2027); in addition, around EUR 710 million is expected from the planned reduction relating to craftsmen’s services.
Further tax changes in the draft
The draft also contains an amendment to the trade tax apportionment standard for operators of data centres. In addition, an increase in the basic wage threshold for tax-free bonuses for work on Sundays and public holidays is planned. These points particularly affect companies and employers whose tax treatment is impacted by trade tax allocation criteria or wage tax exemptions.
Business representatives called for more extensive adjustments of the tax bracket parameters to inflation. The Deutsche Industrie- und Handelskammer also opposed the increase in the mini-job flat-rate tax and additional burdens on partnerships and sole proprietorships.
Positions in the parliamentary debate
Different assessments of the reform project became apparent in the first reading; among other things, improvements to counter creeping tax increases resulting from inflation were called for.
These statements are to be classified as political positions in the ongoing legislative procedure. The first reading did not involve any final parliamentary decision on the draft.
Jahressteuergesetz 2026 also referred to the Finance Committee
Government draft dated 30 September 2026
The draft Jahressteuergesetz 2026 bears Bundestagsdrucksache 21/8283 and is dated 30 September 2026. The lead department is the Bundesministerium der Finanzen (Federal Ministry of Finance). This draft was also referred to the Finance Committee as the lead committee.
The Federal Cabinet had already adopted the government draft on 12 August 2026. The opinion of the Bundesrat and the Federal Government’s counterstatement were submitted to the Bundestag at the same time as annexes.
Opinion of the Bundesrat and Federal Government counterstatement
The Bundesrat issued its opinion on the Jahressteuergesetz 2026 at its 1068th sitting on 25 September 2026. The opinion concerns, among other things, provisions on § 15a EStG (Income Tax Act), the preferential treatment of retained earnings and low-value assets.
In its counter-statement, the Federal Government adopted individual demands made by the Länder. By contrast, the Federal Government rejects the increase in the minimum trade tax multiplier to 300 per cent demanded by the Länder. This point therefore remains politically and technically disputed in the further procedure.
Significance for companies, investors and private individuals
The projects under discussion concern different tax points of reference. For private individuals, changes to the income tax scale, child benefit, child allowances and tax reductions for craftsmen’s services may be particularly relevant. For companies and investors, the focus is, among other things, on trade tax issues, the treatment of partnerships and sole proprietorships, wage tax benefits and possible changes relating to low-value assets.
Since both legislative projects are still in the parliamentary procedure, the final regulatory content has not yet been conclusively determined. The further deliberations in the committees, possible amendments in the Bundestag and the involvement of the Bundesrat will be decisive. Particularly in the case of projects requiring approval, the further course of proceedings may influence the scope, timing and specific design of the planned tax changes.
Frequently asked questions
What does the Einkommensteuerreformgesetz 2027 regulate according to the Bundestag debate?
The draft provides, among other things, for income tax relief as well as counter-financing measures. According to the available information, these include changes relating to craftsmen’s services, the mini-job flat-rate tax and further individual tax provisions.
What practical consequences could the Jahressteuergesetz 2026 have for companies?
For companies, changes relating in particular to § 15a EStG, the preferential treatment of retained earnings, low-value assets and trade tax issues may become significant. The final content depends on the further legislative procedure.
Tax classification in the further legislative procedure
The first reading in the Bundestag does not yet mark a conclusion, but rather the beginning of more in-depth parliamentary scrutiny. For companies, investors and high-net-worth individuals, it may nevertheless be advisable to assess the development of the drafts carefully, as changes in the areas of income tax, trade tax and corporate taxation may affect business planning. MTR Legal Rechtsanwälte advises clients on tax law issues and on the assessment of legislative changes; further information can be found at Legal advice in tax law.
