Annual Tax Act 2026: Key changes at a glance
What the German government is planning
On 12 August 2026, the German Federal Cabinet approved the draft Annual Tax Act 2026 (JStG 2026). As in previous years, the Act brings together numerous changes across different areas of tax law. Key areas include reducing bureaucracy, advancing digitalisation and preventing abusive tax arrangements. At the same time, the legislation responds to developments in European law and recent court rulings.
The draft introduces a number of relevant changes for businesses. We provide an overview of the most important measures currently planned.
Capital gains tax: New rules for foreign major shareholders
One significant change concerns the capital gains tax relief procedure. In future, non-resident taxpayers holding at least ten per cent of a German company are generally to be treated in the same way as major shareholders who are tax resident in Germany.
They will no longer be issued exemption certificates in advance. Instead, capital gains tax is initially to be withheld, after which an application for a refund must be submitted. This subsequent case-by-case review is intended to make it easier to identify and prevent abusive tax arrangements.
For affected foreign shareholders, this will primarily mean a change to the existing procedure and potentially an increased administrative burden.
Licence payments abroad: Threshold set to increase
Elsewhere, the draft legislation provides for a significant simplification. For certain licence payments made abroad, tax currently does not have to be withheld if payments remain below a threshold of EUR 10,000.
Under the JStG 2026, this threshold is set to increase to EUR 100,000. Particularly for companies that regularly obtain rights or licences from foreign contracting partners, the higher threshold could significantly reduce the administrative burden.
However, the obligation to file a tax return for these payments will remain in place, meaning that subsequent reviews by the tax authorities will still be possible.
Platforms: Information exchange to be extended to third countries
Online platforms are already required to report information on certain income earned by their providers. Within the European Union, this data is exchanged between tax authorities on the basis of the EU Directive on Administrative Cooperation.
The JStG 2026 is intended to extend this exchange of information. In future, information on providers based in third countries may also be shared, provided that an effective international agreement is in place with the respective country.
This will further increase tax transparency for cross-border transactions conducted via online platforms.
Global minimum tax: Germany implements international agreements
The German Minimum Tax Act is also set to be amended. This follows the agreement reached by the countries of the Inclusive Framework on BEPS on the so-called “Side-by-Side Package” at the beginning of 2026.
The “Side-by-Side Approach” contained in the package recognises certain national rules where their effect is equivalent to the global minimum tax rules. This international agreement is now to be incorporated into the German Minimum Tax Act.
At the same time, the legal basis for issuing statutory regulations is to be amended to enable further simplifications under the “Side-by-Side Package” to be implemented.
Tax assessments to become digital by default from 2027
One change with a direct impact on many taxpayers concerns communication with the tax authorities.
From 1 January 2027, certain tax assessments and other official correspondence are generally to be issued electronically. This includes, for example, income tax assessments and decisions on tax appeals.
Taxpayers with an active ELSTER account will no longer have to provide separate consent to electronic notification. Once a document is available, they will be notified by email. Anyone with an active ELSTER account who still wishes to receive documents by post will have to submit an electronic request. Electronic notification will therefore become the rule rather than the exception.
Interest on additional tax payments and refunds set to increase
The draft also provides for a relevant change to the interest rate under the German Fiscal Code. The current rate for interest on additional tax payments and refunds is 0.15 per cent for each full month, or 1.8 per cent per year.
From 2027, this is set to increase to 0.3 per cent for each full month, or 3.6 per cent per year.
The German government is responding to the general rise in interest rates. Depending on the individual case, taxpayers may therefore face higher interest charges on additional tax payments, but may also receive higher interest on tax refunds.
Real estate: New rules for allocating the purchase price
The JStG 2026 also introduces a relevant change for the acquisition of developed real estate. The allocation of a total purchase price between land and buildings is to be regulated by law in future.
If the purchase agreement does not contain a corresponding allocation, the ratio of the respective market values is generally to be decisive. A statutory calculation method is planned for determining the share attributable to the building. The Federal Ministry of Finance (BMF) is also expected to provide an official calculation tool for this purpose.
A different allocation will remain possible if it can be substantiated by an expert valuation. The provision is particularly relevant because only the portion of the purchase price attributable to the building forms the basis for tax depreciation.
First place of work: Period set to be reduced to 24 months
Another change concerns the tax treatment of an employee’s first place of work. For assignments to a workplace in Germany, an assignment lasting more than 24 months is to be considered permanent in future. The current threshold is 48 months.
For workplaces abroad, the 48-month period is to remain unchanged. The new rule is to apply for the first time to assignments determined under employment or service law after 31 December 2026. Existing assignments will generally continue to be governed by the current rules. However, if a fixed-term assignment is extended, the extension is to be treated as a new assignment.
Wage tax certificates: Additional reporting requirements for employers
Changes are also planned for electronic wage tax certificates. In future, employers will be required to provide the tax authorities with additional information.
This will include more detailed information on wage replacement benefits, tax-free travel expenses and expenses relating to maintaining a second household for work purposes. The provision of a company car, tax-free employer contributions towards childcare and transfers of employee shareholdings are also to be reported separately.
The expanded reporting requirements are set to apply from 1 January 2028. For employers, the new rules mean that existing payroll processes and the collection of the necessary data should be adapted to the additional requirements in good time.
VAT grouping: By application only in future?
The planned reform of VAT grouping is particularly relevant for corporate groups. Under the current rules, a VAT group generally arises automatically if the statutory requirements are met. There is no active right to opt into the regime. The draft JStG 2026 provides for a fundamental change to this system: in future, the legal consequences of VAT grouping are to apply only following an explicit declaration by the controlling entity.
The inclusion of individual controlled entities in an existing VAT group, as well as their withdrawal, is also to be explicitly regulated. In addition, the draft clarifies that partnerships may also qualify as controlled entities within a VAT group.
This will give companies greater certainty when structuring their VAT groups and allow them to respond more flexibly to changes in their group and ownership structures. The draft also provides for specific correction, reversal, interest and liability rules for VAT groups that have been incorrectly assumed to exist.
An important point for planning purposes: the new rules are set to apply for the first time from 1 January 2030. An initial declaration may be submitted from 1 July 2029 with effect from 1 January 2030. The current rules will remain in place until the end of 2029.
What you should consider now
The Annual Tax Act 2026 is still going through the legislative process, meaning that individual provisions may still change. Nevertheless, it is worth taking a closer look at the draft now.
In particular, companies with cross-border shareholdings or licence payments, corporate groups with VAT grouping arrangements and companies claiming research and development tax incentives should assess how the proposed rules could affect their existing structures and processes.
The planned electronic notification of tax assessments and the higher interest rate under the German Fiscal Code also demonstrate that, alongside specialised tax provisions, the JStG 2026 contains changes that will affect a broad range of taxpayers.
Would you like to know which changes under the Annual Tax Act 2026 could be relevant to you or your business? Our experts can help you assess the proposed new rules at an early stage and identify any potential need for action.