Coalition agreement published – What can German companies expect?

On 9 April 2025, the German political parties CDU/CSU and SPD published their coalition agreement¹ for the upcoming 21st legislative period. The agreement still must be approved by the relevant party committees of CDU and SPD; the CSU approved it already. The election of the Federal Chancellor is planned for the beginning of May. Below are the key issues for companies that will be prioritized by the prospective new federal government.

Organization of the State and Administration

• The coalition intends to pass several administrative streamlining acts annually to reduce administrative regulations and statistical reporting requirements. Measures such as flat-rate payments, cut-off date regulations, and deemed approvals will be introduced more frequently to achieve this.
• To foster innovation, existing laws will be amended to include more opening and experimental clauses, such as real-world laboratories. A federal experimental law is currently being planned.
• A future pact between the federal government, states, and local governments will review tasks and costs. The federal government aims to take on more responsibility for digitalization enforcement, necessitating an amendment to the Basic Law (Article 91c Grundgesetz).

Supply Chain and Sustainability

• The coalition remains committed to German and European climate targets. They aim to further develop the European Green Deal and the Clean Industrial Act to harmonize competitiveness with climate protection. The carbon pricing system, as a vital component, will be maintained, and emissions trading will be encouraged at both European and international levels. Throughout this process, the coalition will consider the competitiveness of the economy and ensure social acceptance.
• Unnecessary burdens at the European level should be avoided. Measures include aiming to introduce a 'zero-risk variant' to the deforestation regulation (EUDR) and to reject the EU Land Act to prevent additional burdens. As it relates to sustainable investments (Taxonomy), sustainability reporting (CSRD), supply chain due diligence (CSDDD), the carbon border adjustment mechanism (CBAM), and the overwhelming number of delegated acts, excessive regulations should also be prevented.
• The European Commission's proposals as part of the Omnibus package to simplify the Carbon Border Adjustment Mechanism (CBAM) should be actively supported. Efforts should focus on making the CBAM less bureaucratic and more efficient.
• The Supply Chain Due Diligence Act (LkSG) will be abolished and replaced with a law on international corporate responsibility that enacts the EU's Corporate Sustainability Supply Chain Directive (CSDDD) in a manner that is both low in bureaucracy and easy to enforce. According to the coalition agreement, the reporting requirements under the LkSG will be immediately abolished and will no longer apply. Legal due diligence requirements will not be sanctioned until the new law is in effect, except for severe human rights violations. Further examination may be required to determine whether the immediate abolition of the LkSG constitutes a violation of the requirements in Article 1(2) of the CSDDD.
• The coalition supports the European Commission's Omnibus Initiative to significantly reduce and delay the extensive requirements for sustainability reporting, particularly for small and medium-sized enterprises.

Company Law and the Environment for Founders

• The right to challenge resolutions under stock corporation law will be reformed in order to enhance legal certainty and boost Germany's competitiveness as a business location, while at the same time limiting opportunities for abuse.
• A reform of the law governing cooperatives ("Genossenschaften") is planned, along with the introduction of a new, independent legal form of "company with tied assets". This new legal form will feature an irrevocable tie of assets and participation based on membership principles, without tax privileges or discrimination.
• The coalition agreement notes that start-ups are the hidden champions and future DAX corporations. To reduce bureaucracy, the coalition plans to explore the creation of a protective zone for start-ups, simplify notarial procedures and digital certification processes, and enable automatic data exchange between notaries, tax offices, and trade licensing offices. The goal is to establish a comprehensive one-stop shop that digitally integrates all applications and administrative procedures onto a single platform, allowing a company to be established within 24 hours.

Reduction of formal requirements

• The formal requirements outlined in §§ 126 et seq. of the German Civil Code will be reformed, restructured, and simplified, and where necessary, adapted to incorporate new technological advancements.
• The reduction of written form requirements in labor law (e.g. for time limits) will be implemented.

Foreign Trade and Investment Control

• At the national level, an amended Foreign Trade and Payments Act will be introduced soon to expedite and simplify examination procedures. The aim is to effectively prevent foreign investments in critical infrastructure and strategically relevant areas that contradict German national interests.
• The China strategy is to be revised according to the principle of "de-risking". An expert commission is to be set up in the German Bundestag to analyze and present risks, dependencies and vulnerabilities in economic relations in an annual report and recommend de-risking measures.
• A free trade agreement with the USA is sought to avoid a trade conflict in the short term. The focus here is on reducing import tariffs on both sides of the Atlantic.

Further Development of competition and antitrust law

• The effective application of competition law should be ensured. In particular, merger control should place greater emphasis on international competitiveness, European sovereignty, and certainty in European competition law, while also making procedures faster and more efficient.
• The effective enforcement of the Digital Markets Act by the relevant authorities at the European level should be supported.
• An expert commission on competition and artificial intelligence will be established at the Federal Ministry for Economic Affairs.

Corporate Taxes

• The corporate income tax rate is to be reduced by one percentage point in each of five steps, starting on 1 January 2028.
• The majority of companies in Germany are subject to income tax. To enable taxation that is neutral in terms of legal form, the option model under § 1a of the Corporation Tax Act (Körperschaftsteuergesetz, KStG) and the favorable treatment of retained earnings under § 34a of the Income Tax Act (Einkommensteuergesetz, EstG) will be significantly improved.
• An examination will be conducted to determine whether, from 2027, the commercial income of newly established companies can fall within the scope of corporation tax regardless of their legal form.
• The minimum tax for large corporations will be retained. The coalition supports international efforts to permanently simplify the minimum tax.
• The effects of international divergences on the global tax architecture are being monitored. The coalition will work at the European level to ensure that German companies are not disadvantaged in international competition as a result.
• Employee equity participation will be further strengthened by designing tax and social security legislation to be more practice-oriented.

Conclusion

The coalition aims to create conditions for a competitive and growing German economy by improving the structural framework for companies and employees, promoting innovation, reducing bureaucracy extensively, and making fairness in performance a guiding principle.

It remains to be seen how the planned legal measures will unfold in practice. It is unclear whether companies can directly rely on statements in the coalition agreement, such as the immediate abolition of the LkSG reporting requirements and the announced suspension of sanctions for legal due diligence requirements. Since the LkSG is to be replaced by a law on international corporate responsibility, the implementation of the current LkSG requirements remains important until new legislation is enacted.

_{1 koalitionsvertrag_2025.pdf}

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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