German Tax Overhaul 2026: New Limits on Executive Bonuses and Expanded Loss Offsetting
Published on 08/01/2026 at 01:42 | Redaktion boerse-global.de
The August 2026 update to Germany's tax law commentary brings significant changes for business owners, investors, and families alike. Among the most consequential adjustments: stricter caps on managing director compensation and the removal of a long-standing restriction on futures trading losses.
Executive Pay: The 25 Percent Rule
For companies with shareholder-managing directors, the risk of a hidden profit distribution (verdeckte Gewinnausschüttung, or vGA) looms large when compensation packages exceed what an arm's length comparison would justify. Current expert guidance, updated as of June 2026, now provides clearer benchmarks. Bonuses should not exceed 25 percent of total compensation or 50 percent of annual net profit. Any special payments—overtime flat rates or Sunday and holiday premiums, for instance—are typically treated as vGA when paid to controlling shareholder-directors.
The rules apply to the full compensation picture: base salary, bonuses, and benefits in kind must all withstand external scrutiny.
Futures Trading: Unlimited Loss Offsetting
A major shift has occurred for investors trading futures contracts. The previous annual cap of 20,000 euros on loss offsetting has been abolished by the 2024 Annual Tax Act (Jahressteuergesetz 2024). The change applies retroactively to losses incurred after December 31, 2020.
However, a critical deadline remains for cross-bank loss compensation. Applications for loss certificates must reach the paying institution by December 15 of the current year. Once submitted, the application is irrevocable—the loss is then absorbed by the institution and can only be claimed through the annual income tax return.
Saver's Allowance: Deductions Remain the Exception
The saver's lump sum (Sparer-Pauschbetrag) under Section 20 Paragraph 9 of the Income Tax Act (EStG) stands at 1,000 euros for single filers and 2,000 euros for jointly assessed married couples. Current commentary confirms that deducting actual income-related expenses is generally not permitted. Exceptions apply only in specific situations—for example, income not subject to withholding tax or cases falling under Section 32d Paragraph 2 No. 3 EStG.
Post-Liquidation Payments: What Counts as Taxable Income
The tax treatment of payments received after a corporation has been dissolved has also been clarified. Under Section 20 Paragraph 1 No. 2 EStG, all payments count as taxable income unless they represent repayment of nominal capital. The sole exemption covers distributions from the tax contribution account (steuerliches Einlagekonto) as defined in Section 27 of the Corporate Income Tax Act (KStG).
Two New BFH Rulings Reshape Partnership and Child Benefit Law
The Federal Fiscal Court (Bundesfinanzhof, BFH) has issued two rulings that refine the legal landscape.
In a decision dated July 16, 2025 (case reference I R 13/22), the court addressed the application of Section 50i EStG to holding partnerships (Besitz-Personengesellschaften). The tax relief applies only when assets have actually been transferred into business assets and silent reserves exist.
The second ruling, from April 22, 2026 (III R 7/24), concerns child benefit law. Training as an emergency medical technician (Rettungssanitäter) comprising just 520 hours does not constitute completion of initial vocational training under Section 32 Paragraph 4 Sentence 2 EStG. The BFH requires a minimum duration of one year. Consequently, entitlement to child benefit for subsequent training remains intact in such cases.
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