Federal Cabinet approves Annual Tax Act of 2026: Overview of the key changes

On 12 August 2026, the Federal Cabinet adopted the government draft of the Annual Tax Act 2026 (Jahressteuergesetz 2026). Behind the many seemingly technical amendments lie changes with, in some cases, far-reaching practical implications: VAT grouping (umsatzsteuerliche Organschaft) is being fundamentally restructured and will in future require an active election by the controlling company (Organträger). The statutory interest rate on tax assessments (Vollverzinsung) rises to 3.6% p.a. For the first time, a statutory provision is being introduced governing the allocation of the purchase price for developed real estate, and electronic notification of administrative acts (Verwaltungsakte) becomes the norm. At the same time, a leaked draft of the 2027 Income Tax Reform Act raises fundamental questions of tax policy. This article provides an overview of the key changes.