Germany moves to extend tax exemptions for EVs, working pensioners

BERLIN: The German Cabinet advanced several key policies, extending tax exemptions for electric vehicles and working pensioners while approving a savings package to avoid a rise in social security contributions.

The measures – which all require parliamentary approval – are part of Chancellor Friedrich Merz’s effort to revive the sluggish German economy after two consecutive years of recession.

New electric cars are to be exempt from motor vehicle tax until 2035, five years longer than previously.

“We need to set the right incentives now so that we can get many more electric cars on the road in the coming years,” said Finance Minister Lars Klingbeil in a statement.

The tax exemption is meant to assist consumers in switching to electric models and to support Germany’s crucial carmaking sector.

The Finance Ministry expects the measure to cost €50 million ($58 million) in the coming year, rising to €380 million by 2030.

Meanwhile, pensioners are poised to be able to earn €2,000 per month tax-free in retirement age if they continue to work.

“We are providing further impetus for economic growth in Germany,” said Klingbeil, arguing that the economy needs experienced skilled workers. “This strengthens the labour market, it strengthens the economy and it’s a real plus for anyone who wants to remain professionally active.”

In addition, the Cabinet passed a package of measures set out by Health Minister Nina Warken to save €2 billion per year in health care costs.

The move is intended to avoid German taxpayers from seeing another round of hikes in social security contributions.

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