Insights
TAX & BUSINESS
Changes to Income Tax and Real Estate Earnings Tax
Parliament has passed the 2027–2028 Budget Support Act. It also introduced changes to income taxes and the real estate earnings tax.
Restriction of the investment‑related profit exemption
For fiscal years that start after 31 December 2026 and before 1 January 2030, the investment‑related profit exemption will be limited to real investments. Investments in securities of any kind – including government bonds – will therefore no longer be favoured during this period. For fiscal years that start after 31 December 2029, the investment‑related profit exemption can again be claimed for securities investments.
New progressive corporation tax rate from 2028
From 2028 a progressive corporation tax rate will be introduced. In principle the existing rate of 23% remains unchanged. For the portion of income that exceeds EUR 1,000,000, the rate increases to 24%. The new rule applies to both unlimited tax‑resident corporations and limited tax‑resident foreign corporations.
For limited tax‑resident domestic corporations the rate, however, remains unchanged at 23%. In addition, a progression reservation will be introduced for unlimited tax‑resident corporations. This means that income exempted under a double‑taxation agreement will be taken into account when determining the applicable corporation tax rate.
For corporate groups the progressive rate will be applied to the total assessed group income. The 23% rate is therefore only available up to a group income of EUR 1,000,000 – regardless of how many companies make up the group.
Increase in real estate earnings tax
The Budget Support Act also introduced an increase in the real estate earnings tax on the disposal of legacy assets after 31 December 2026. Affected are properties that were no longer subject to tax as of 31 March 2012. These are parcels acquired before 31 March 2002. The statutory rate of 30% remains unchanged. However, the adjustment of the flat acquisition cost results in a higher effective tax burden.
Previously, for legacy‑asset land parcels a flat 86% of the sale proceeds was deemed to be the acquisition cost. This yielded an effective tax burden of 4.2% of the sale proceeds. For land disposals after 31 December 2026 the flat acquisition cost is reduced from 86% to 80%. Consequently the effective tax burden rises to 6%.
For the disposal of legacy assets that were re‑zoned to building land after 31 December 1987, provided that the re‑zoning occurred after the last paid acquisition, the flat acquisition cost is reduced from 40% to 30% of the sale proceeds. This raises the effective tax burden from 18% to 21%. If a parcel was re‑zoned after 31 December 2024, the re‑zoning surcharge of 30% introduced by the 2025 Budget Support Act must also be taken into account. In these cases the effective tax burden increases from the previous 23.4% to 27.3%.
For fiscal years that start after 31 December 2026 and before 1 January 2030, the investment‑related profit exemption will be limited to real investments. Investments in securities of any kind – including government bonds – will therefore no longer be favoured during this period. For fiscal years that start after 31 December 2029, the investment‑related profit exemption can again be claimed for securities investments.
New progressive corporation tax rate from 2028
From 2028 a progressive corporation tax rate will be introduced. In principle the existing rate of 23% remains unchanged. For the portion of income that exceeds EUR 1,000,000, the rate increases to 24%. The new rule applies to both unlimited tax‑resident corporations and limited tax‑resident foreign corporations.
For limited tax‑resident domestic corporations the rate, however, remains unchanged at 23%. In addition, a progression reservation will be introduced for unlimited tax‑resident corporations. This means that income exempted under a double‑taxation agreement will be taken into account when determining the applicable corporation tax rate.
For corporate groups the progressive rate will be applied to the total assessed group income. The 23% rate is therefore only available up to a group income of EUR 1,000,000 – regardless of how many companies make up the group.
Increase in real estate earnings tax
The Budget Support Act also introduced an increase in the real estate earnings tax on the disposal of legacy assets after 31 December 2026. Affected are properties that were no longer subject to tax as of 31 March 2012. These are parcels acquired before 31 March 2002. The statutory rate of 30% remains unchanged. However, the adjustment of the flat acquisition cost results in a higher effective tax burden.
Previously, for legacy‑asset land parcels a flat 86% of the sale proceeds was deemed to be the acquisition cost. This yielded an effective tax burden of 4.2% of the sale proceeds. For land disposals after 31 December 2026 the flat acquisition cost is reduced from 86% to 80%. Consequently the effective tax burden rises to 6%.
For the disposal of legacy assets that were re‑zoned to building land after 31 December 1987, provided that the re‑zoning occurred after the last paid acquisition, the flat acquisition cost is reduced from 40% to 30% of the sale proceeds. This raises the effective tax burden from 18% to 21%. If a parcel was re‑zoned after 31 December 2024, the re‑zoning surcharge of 30% introduced by the 2025 Budget Support Act must also be taken into account. In these cases the effective tax burden increases from the previous 23.4% to 27.3%.