Bundestag Passes Annual Tax Act 2026: Travel Rule Stays, Interest Doubles

The Bundestag passed the Annual Tax Act 2026 (Jahressteuergesetz 2026) on 12 November 2026. The CDU/CSU and SPD voted for it, the AfD and the Greens voted against it, and The Left abstained (Plenary Protocol 21/108). The law still needs the Bundesrat’s consent before it can be published and take effect. The formal text is a consent law (Zustimmungsgesetz): “The Bundestag has, with the consent of the Bundesrat, enacted the following law.”

Two measures from the cabinet draft did not survive. Both still appear in earlier GermanPedia articles based on that draft. Those articles should be updated once the law is published.

• The 48-month “first workplace” rule stays. The government had wanted to cut the period after which a posting in Germany counts as your regular workplace (erste Tätigkeitsstätte) from 48 months to 24 months. The Finance Committee dropped that change. Experts had warned that soldiers, construction workers and staff on long infrastructure projects would have lost travel-expense and meal-allowance tax treatment after two years instead of four. The 48-month rule in § 9(4) sentence 3 of the Income Tax Act (EStG) remains.
• Tax notices will not automatically move online. The draft would have made ELSTER, Germany’s official tax portal, the default way tax offices send assessments. The committee deleted that proposal so it can be reviewed again. Passing this law does not, by itself, switch your tax mail to digital-only.
• Interest on back taxes and refunds doubles from 2027. For full interest (Vollverzinsung) under § 233a of the Fiscal Code (AO), the monthly rate rises from 0.15% to 0.3% from 1 January 2027. That is 3.6% a year instead of 1.8%. The higher rate applies both ways: to what you owe the tax office and to what it owes you.
• Full child tax allowances for children in another EU or EEA country. You will get the unreduced German child allowance (Kinderfreibetrag) and training allowance (Ausbildungsfreibetrag). Until now, those amounts could be cut to what was “necessary and appropriate” given living costs in the child’s country.

NOTE: This is not yet law. The Bundesrat must still consent, and the text can still change. Nothing below takes effect until the act is published in the Federal Law Gazette. The interest rate itself is written to apply from 1 January 2027; the child-allowance rule is written to apply to all tax cases that are still open once the law is in force.

Tax Interest Doubles From 2027

The amended § 238(1a) AO sets the monthly rates for § 233a interest as follows: 0.15% from 1 January 2019 through 31 December 2026, and 0.3% from 1 January 2027. Today’s law already says what happens if one interest period crosses a rate change: the tax office splits it into parts and calculates each part by the day, counting every month as 30 interest days and every year as 360 days (§ 238(1b) AO).

This interest usually starts after a grace period, for example when an assessment after an audit leaves you with a back payment, or when a refund is delayed. It is not a penalty for filing late (that is a different charge). If you expect a large back payment that will still be running in 2027, the higher rate is worth planning for. If you are waiting on a large refund, the higher rate would also apply in your favour from January 2027. A tax advisor can look at the dates in your case.

Full Child Allowances for Children in the EU or EEA

This is one of the most important changes for many expats. If your child lives in another EU member state or in an EEA country (Iceland, Liechtenstein or Norway), the Finance Committee’s text gives you the full German child allowance and training allowance. The old reduction, which looked at living costs in the child’s country, would apply only to children who live outside the EU and the EEA (§ 32(6) sentence 4 EStG and § 33a(2) sentence 2 EStG, in the version the Bundestag adopted).

In 2026, the full child allowance is €3,414 and the care, education or training allowance is €1,464, per parent. The separate training allowance (Ausbildungsfreibetrag) under § 33a(2) EStG is €1,200 in 2026; it is also unreduced for a child living in the EU or the EEA. For spouses who file jointly, those amounts double when the child is a child of both. The Annual Tax Act does not change these euro figures. A separate bill, the Income Tax Reform 2027, would raise them; that bill has not yet passed.

This is a tax allowance, not Kindergeld. Kindergeld is a monthly payment and is not what this provision changes. Once the Annual Tax Act is in force, the new wording is to apply to all cases that are still open, including earlier years if the assessment is not yet final.

What Else Passed?

Most of the act is technical. A few other points may affect expats:

• Cash business payments over €10,000 can no longer be deducted as business expenses. This first applies to payments made after 9 July 2027. This matters if you are self-employed and pay suppliers in cash.
• Property sales in a divorce: there is a new exception so that selling the former family home as part of a divorce settlement is not treated as a taxable private sale in the usual way, if you used the home yourself until you moved out.
• Sunday, holiday and night supplements: the “base wage” used to calculate how much of those supplements stays tax-free is defined more tightly, so some people may have a smaller tax-free amount if their pay includes tax-free or flat-taxed parts.

What You Should Do Now

• Wait for the Bundesrat and for publication in the Federal Law Gazette before treating any of this as final.
• If your children live in another EU or EEA country, keep this change in mind for assessments that are still open, and mention it to your tax advisor once the law is in force.
• If you work on long postings in Germany, your travel-expense treatment is not being shortened to 24 months.
• Filing a tax return? Compare tax software in English or find an English-speaking tax advisor.

You can use online services to help you file and save income tax in Germany. We find Wundertax*, SteuerGo*, and WISO Steuer* (German) among the best tax software out there.

If you have a complex tax return or filing it yourself makes you nervous, you should get advice from a tax consultant. Tax consultants are not cheap in Germany. Depending on your situation, they may cost between 600€ and 2000€.

However, a good tax consultant can save you a lot of money.

You can get a free quote from a tax consultant here. The tax advisor offer services in English.

Our earlier pieces, German Cabinet Approves Jahressteuergesetz 2026 and What Are the Tax Changes in Germany in 2026?, describe the cabinet draft, including the 24-month travel rule and default digital notices that the Bundestag has now dropped. Use this article for the vote and those corrections.

See every change in Germany for 2027 ->