Federal budget trends up to and including December 2025

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Tax revenue in December 2025

Tax revenue trends

Total tax revenue

Overall tax revenue (excluding local authority taxes) was up by more than 2% on the year in December 2025 (see the table “2025 trends in tax revenue (excluding local authority taxes)”). However, the December figures are inflated due to one-off effects involving federal taxes (see below for more details). If these effects are excluded, year-on-year revenue growth would have been weaker.

With joint taxes, which are responsible for the largest share of tax revenue, the picture was mixed. Receipts from non-assessed taxes on earnings declined significantly in year-on-year terms due to an inflated baseline figure in 2024. Revenue from final withholding tax on interest and capital gains, corporation tax and value added taxes also fell on the year. In contrast, wages tax and assessed income tax both posted revenue growth (see further details on specific taxes below). On balance, receipts from joint taxes stagnated in year-on-year terms in December 2025.

Revenue from taxes accruing solely to the Federation was up sharply in December, by around 13½% on the year. This was due to one-off effects, however. First, energy duty and electricity duty had a very low baseline in December 2024, because the revenue allocated to this month was only collected in January 2025 (see the article on tax revenues in December 2024 in the January 2025 issue of the monthly report¹). In addition, receipts from alcohol duty were inflated in December 2025 for accounting reasons. On the other hand, there was a refund of the EU energy crisis contribution, which increased revenue. Without the above-mentioned effects, revenue from taxes accruing solely to the Federation would have decreased slightly.

In contrast, receipts from taxes accruing to the Länder continued to post tangible growth, increasing by around 19% on the year in December 2025. This was due to the trends in the two highest-revenue Länder taxes: receipts from inheritance tax rose by around 32½%, and the yield from real property transfer tax was up by approximately 17%.

Overall, revenue received by the Federation, Länder and local authorities (excluding taxes accruing solely to local authorities) increased by almost 5% in 2025 compared with 2024. Breaking this trend down into the individual categories, revenue from joint taxes rose by almost 4% on the year in 2025, receipts from federal taxes were up by around 5%, and Länder taxes posted strong revenue growth of approximately 29%.

Apportionment of tax revenue among the different levels of government

The Federation’s tax receipts (after accounting for supplementary federal grants) increased by around 3% in December 2025, which was largely the result of one-off effects involving federal taxes. In contrast, the Federation’s take from joint taxes shrank. Particularly sharp revenue falls were observed for non-assessed taxes on earnings and value added taxes. The yield from value added taxes was affected by changes in the fixed payments that are transferred from the Federation’s share of VAT revenue to the Länder and local authorities in accordance with the Fiscal Equalisation Act (Finanzausgleichsgesetz) (see the table “Apportionment of VAT revenue in December 2025” below). These fixed payments were significantly higher in December 2025 than in the same month of 2024. This was due to the impact of the Third Child Daycare Quality Act (3. KiTA-Qualitätsgesetz) and the Act Amending the 2025 Fiscal Equalisation Act (FAG-Änderungsgesetz 2025) (see the article on tax revenues in November 2025 in the December 2025 issue of the monthly report²). In addition, transfers of own resources to the EU, which are financed from the Federation’s tax revenue, fell significantly in year-on-year terms in December 2025, while supplementary federal grants to the Länder were up on the year.

Länder tax receipts (after accounting for supplementary federal grants) were up by roughly 2% on the year in December. In an inversion of its effect on federal revenues, the above-mentioned change in fixed payments resulted in an increase in Länder receipts from VAT and thus from joint taxes as a whole. Local authorities’ share of joint taxes even experienced year-on-year growth of almost 5% in December 2025, not least due to the changes to the VAT revenue allocation system.

Apportionment of VAT revenue in December 2025

The Federation’s overall tax receipts (after the deduction of supplementary federal grants) increased by almost 4% on the year in 2025. Higher revenues from federal and joint taxes were offset by increases in transfers to the EU, supplementary federal grants, and federal subsidies to the Länder for public transport. Länder tax receipts (after accounting for supplementary federal grants) posted somewhat stronger year-on-year growth of around 5% in 2025. This was due to increases in supplementary federal grants and federal subsidies for public transport, as well as significantly higher revenue from Länder taxes. Local authorities’ take from joint taxes was up by about 6% on the year in 2025, which was largely the result of higher receipts from final withholding tax on interest and capital gains (see below).

Further details on specific taxes

Wages tax

Revenue from wages tax increased by around 5½% on the year in December 2025, which is in line with the overall growth rate for 2025. This strong upwards trend compared with 2024 is likely to be mainly the result of tangible increases in gross wages and salaries over the course of 2025. However, the current situation on the labour market poses risks to future revenue trends for this tax. Recently, employment levels have been stagnant at best (see the table “Current economic indicators” in the German version of the monthly report). Jobs have been lost in the industrial sector in particular, which has relatively high wage levels compared with other sectors. Severance payments associated with job reduction programmes increase wages tax revenue on a one-off basis at the time when they are paid out. However, the loss of jobs tends to dampen growth in wages tax revenue in the long term. Child benefit payments (which are financed from wages tax receipts) rose by nearly 1½% on the year in 2025.

Taxes on earnings

With regard to assessed income tax and corporation tax, the fourth instalment of prepayments for 2025 was due in December, which had a significant impact on the revenue trend in this month. Prepayments for assessed income tax rose by almost 3% on the year. Taking into consideration (retroactive) prepayments for previous periods, refunds and back payments, which are all determined by the revenue administration’s assessment activities, revenue from this tax rose by around 2% on balance. Overall, receipts from assessed income tax were up by almost 5% on the year in 2025. In addition to the relatively robust economic trend in sectors where assessed income tax is relevant for many companies, the taxation of pension income probably also played a significant role in driving revenue growth. Research allowance payments financed from revenue from assessed income tax increased strongly on the year in 2025. However, they totalled only approximately €86m and as such did not have a significant impact on overall revenue, which was over €78bn.

In the case of corporation tax, prepayments for 2025 fell by almost 2% in December, which is likely related to the challenging economic environment, particularly for larger export-oriented companies. Taking into account retroactive prepayments, back payments and refunds, revenue from this tax fell by almost 4½% compared with December 2024. Looking at 2025 as a whole, receipts from corporation tax fell by 1½% in year-on-year terms. Research allowance payments financed from corporation tax receipts totalled over €1.1bn – a year-on-year rise of about 59% – and thus had a larger impact on net results than was the case for research allowance payments financed from assessed income tax.

Revenue from non-assessed taxes on earnings dropped sharply in December, falling by almost 27% on the year. However, this was partly the result of an inflated baseline figure in December 2024. Overall, receipts from non-assessed taxes on earnings were down by around 8½% on the year in 2025. Significantly higher refunds paid out by the Federal Central Tax Office in comparison with 2024 played a role in this regard. In addition, many companies are likely to be pursuing cautious dividend policies, in light of the challenging economic situation.

Receipts from final withholding tax on interest and capital gains fell by around 4½% on the year in December 2025. However, revenue from this tax remained at a very high level compared with 2024. Following an extremely strong start to 2025, the year-on-year growth rate generally became progressively weaker over the course of the year. This is probably due to the fact that interest rates have fallen significantly again, which shows up in the revenue trend with a certain time lag. Overall, revenue from this tax was up sharply in year-on-year terms in 2025, increasing by almost 29%. Receipts from this tax are to a large degree determined by the level of capital gains, which can be highly volatile. However, it can be difficult to interpret the revenue trend because separate statistics on the two revenue components are not available.

Value added taxes

Revenue from value added taxes was down slightly on the year in December 2025, falling by almost 1% on the year. A certain degree of volatility in the monthly results is typical for this tax category, a phenomenon which has been exacerbated since the introduction of the One Stop Shop (OSS) scheme³. Overall, receipts from value added taxes were up by almost 3% on the year in 2025. Moderate revenue growth can probably be anticipated in the coming months, given expectations about the trend in the tax base for VAT.

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