Germany Announces 75% Tax Deduction for Electric Vehicles to Boost Economy

Germany is planning to introduce a series of corporate tax incentives to stimulate investment and help the economy recover from prolonged stagnation. The measures, which include allowing companies to deduct 75% of the cost of purchasing electric vehicles from their taxes in the year of purchase, are part of a broader effort to boost commercial investment and economic growth.

According to a draft law distributed to other ministries and awaiting parliamentary approval, the measures also include previously announced plans to promote business investment through more generous depreciation deductions. The law further states that once these measures expire, the corporate tax rate will be reduced from 15% to 10%.

Chancellor Friedrich Merz, who has been in office for less than a month, has pledged to take swift action to stimulate economic growth. Economic output has been declining for the past two years, and economists predict that Germany will experience another year of stagnation before infrastructure and defense investments, planned for 2026, begin to boost economic activity.

The plan reflects a growing recognition that the lack of growth is partly due to long-term issues that have weakened Germany's attractiveness as a business destination. Given its heavy reliance on industrial exports, Germany is also vulnerable to the trade wars initiated by Donald Trump.

Merz is scheduled to visit Washington this week for his first face-to-face meeting with Trump since taking office as Chancellor. This visit underscores Germany's efforts to navigate the complex geopolitical landscape and secure favorable trade conditions.