Whether it’s buying a machine before the end of December, promising a bonus or distributing profits: at the end of the year, many companies face decisions with tax implications. However, not every payment reduces profits, and some tax relief can be achieved without making a short-term expenditure. These five checkpoints show where you can still take action for 2026 and what you should already be preparing for 2027.
Effective end-of-year planning begins with two questions: What is the estimated taxable profit, and what funds will the company require in the coming months? The following guidance is aimed primarily at companies that prepare balance sheets; where dividends and directors’ remuneration are concerned, the focus is on limited liability companies (GmbHs).
1. Project earnings and ensure liquidity
The current financial analysis is a starting point, but does not yet constitute a tax forecast. Add in expected turnover, outstanding incoming invoices and any identifiable risks of non-payment on receivables. Then compare the projected tax liability with the advance payments already made. This will enable you to identify in good time whether funds should be set aside for any additional payments or whether an adjustment to the advance payments should be considered.
For companies that prepare balance sheets, it is generally the economic allocation that determines when an expense is recognised, not the date of payment. A service paid for in December for the following year therefore does not automatically reduce the profit for 2026. Conversely, a service already provided in 2026 may need to be taken into account, even though the invoice is not received until 2027. You should therefore check that your accounts are complete before authorising any additional expenditure.
2. Schedule investments in a targeted manner
Anyone who needs a machine or business equipment anyway should consider both the delivery date and depreciation together. For movable fixed assets acquired or manufactured between 1 July 2025 and 31 December 2027, declining-balance depreciation is permitted: up to three times the straight-line rate, with a maximum of 30 per cent annually of the respective residual value (Section 7(2) of the Income Tax Act). This shifts deductions to earlier years; the total deductible costs do not increase as a result.
An example: A machine purchased in December and ready for use costs 60,000 euros; its useful life is ten years. With a 30 per cent declining balance depreciation rate, only 1,500 euros will be allocated to 2026 – that is, one twelfth of the annual amount. A purchase order or deposit alone is not sufficient. As the rule also applies in 2027, the business’s needs should determine the timing.
One important exception relates to eligible company-owned electric vehicles: under Section 7(2a) of the Income Tax Act (EStG), 75 per cent of the acquisition cost may be written off in the year of acquisition, without any reduction on a monthly basis. This rule also applies to purchases made between 1 July 2025 and the end of 2027; however, a special depreciation allowance for the same vehicle is not permitted.
3. Check investment allowances and time limits
Tax expenses may also arise prior to an investment. Under the investment allowance (IAB) provided for in Section 7g of the Income Tax Act (EStG), up to 50 per cent of the anticipated costs of eligible movable, depreciable fixed assets may be deducted in advance. The relevant profit in the year of deduction must not exceed 200,000 euros. Where the asset is used by the owner, it must generally be used for business purposes to an extent of at least 90 per cent at a domestic business premises; letting the asset may also qualify for the relief.
For an IAB 2026, the purchase does not have to take place by the end of the year; the deduction can be assessed as part of the profit calculation. Where the financial year coincides with the calendar year, there is generally time until the end of 2029 to make the investment. It is, however, urgent to consider an IAB from 2023: Its standard investment period ends on 31 December 2026. If the investment is not made by the deadline, the deduction must be reversed – potentially resulting in additional tax liability and interest. The requirements regarding use and retention generally apply until the end of the financial year following the investment.
For actual acquisitions, a special depreciation allowance totalling up to 40 per cent may also be claimed in the year of acquisition and the four subsequent years. The profit threshold of 200,000 euros refers here to the previous year. A prior IAB is not required for this. Have the combination with the standard depreciation calculated on the basis of your profit forecast.
4. Align distributions with funding requirements
A profit distribution does not reduce the GmbH’s tax liability. It distributes profits to the shareholders and does not reduce the company’s taxable income (Section 8(3) of the Corporation Tax Act). Recipients may be subject to further taxation; the amount of this depends, amongst other things, on who holds the shareholding and how it is classified for tax purposes.
You should therefore check the distributable profit, the requirements under company law and the available liquidity before taking a decision. In doing so, take into account taxes, investments and the financing requirements for 2027. The turn of the year alone is not a reason to pay out money in December. The decisive factors are the amount that shareholders will receive after tax and the funds the GmbH will continue to require.
5. Document bonuses and agree on profit-sharing arrangements in good time
An employee bonus may be recognised as an expense for 2026, even if it is not paid out until 2027. For this to be the case, the criteria for a liability or provision must be met as at the balance sheet date. You should therefore document the contractual basis, the performance period, the achievement of targets and the calculation. The mere intention to pay a bonus at a later date is not sufficient.
Stricter requirements apply to controlling shareholders who are also managing directors: in particular, remuneration must be clearly defined, unambiguous and agreed in advance. A profit-sharing payment for 2026 that is only promised retrospectively at the end of the year carries the risk of being classified as a disguised profit distribution and, consequently, not being recognised for tax purposes as a business expense. Check existing commitments to ensure they are appropriate and are actually implemented. You should agree on and validly arrange any new annual arrangements for 2027 before the start of the remuneration period.
Conclusion
Start with a reliable profit and cash flow forecast. This will help you determine which investments make sense, which deadlines need to be met and how much flexibility remains for remuneration or profit distributions.
To do this, compile your latest management accounts, investment plans, outstanding investment deductions (IABs) and existing remuneration agreements.
Based on this information, you can work with your tax adviser to identify the steps still required for 2026 and make informed decisions for 2027.
Identifying tax planning opportunities in good time
ACCONSIS helps companies to assess their tax situation, take key deadlines into account and plan ahead for upcoming decisions.
Further information: Find out more about tax advice for businesses at ACCONSIS · Tax planning 2026: Why many are missing out on potential
Looking to identify tax opportunities at the end of the year, or do you have any questions about tax planning?
If you have any questions regarding investments, depreciation, distributions or other tax planning options at the end of the year, please do not hesitate to contact me.
Simply book an appointment using the booking options shown opposite.
Yours sincerely,
Stefan Straßl
Your ACCONSIS contact
Stefan Strassl
Tax consultant
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or via email
s.strassl@acconsis.de
FAQ – Frequently asked questions about year-end tax planning
What actually needs to be completed by 31 December 2026?
Where the financial year coincides with the calendar year, an investment for an IAB from 2023, for example, must in principle be completed by then. Similarly, a purchase order is not sufficient for regular depreciation in 2026. Options relating to the determination of profit, on the other hand, can generally still be exercised as part of the preparation of the annual accounts.
How much tax can you save by making a purchase in December?
This depends on the allowable deduction and the individual’s tax liability. The standard straight-line or declining-balance depreciation is generally reduced on a pro rata monthly basis. Different rules apply to eligible electric vehicles. Furthermore, the depreciation amount is not the same as the tax saving.
Can a GmbH also claim an investment allowance?
Yes, provided it meets the requirements of Section 7g of the Income Tax Act (EStG). These include, in particular, the relevant profit threshold, a qualifying investment and the prescribed use. The legal form alone does not preclude the IAB.
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