Germany extends €1,000 tax-free bonus despite rising financial concerns
Germany's governing coalition of center-right and center-left parties plans to extend the originally proposed €1,000 tax-free relief bonus—initially set for this year—until June 30, 2027. Finance Minister Lars Klingbeil (SPD) expects the measure to provide €2.8 billion in total relief, Handelsblatt reported in its Tuesday edition, citing insider sources. The decision stems from a draft resolution by the coalition factions, set to be approved by the Bundestag on Wednesday.
The cost far exceeds the original estimate, as significantly more companies are expected to take advantage of the incentive the longer it remains available. The coalition committee, comprising the CDU/CSU and SPD, first approved the relief bonus on April 12, allowing employers to voluntarily grant their employees a tax- and social-security-exempt €1,000 payment in 2026. Businesses would be able to deduct the expense as an operating cost. To offset the lost tax revenue, the federal government plans to raise tobacco taxes as early as 2026—earlier than initially planned.
Following the coalition's decision, employers and industry groups fiercely criticized the measure, arguing that many companies—already strained by the economic downturn—could not afford the additional burden. They also deemed the original timeframe too tight. Last week, Chancellor Friedrich Merz (CDU) responded by stating that the bonus was optional and could be paid in partial amounts or even deferred to 2027. The coalition partners have now finalized this revised agreement.
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