A planned tax exemption for overtime bonuses is facing delays and is unlikely to be implemented as swiftly as initially anticipated. Originally, the German Federal Ministry of Finance intended to introduce the measure alongside the proposed “Active Pension” scheme, but it has now been omitted from a revised draft, according to reports from government and coalition sources cited by the Handelsblatt newspaper.
The shift has generated friction within the governing coalition. Just two weeks ago, a draft of the “Labor Market Strengthening Act” was released, which included both the Active Pension and the tax exemption for overtime bonuses. However, according to information currently in the early coordination phase within the German government, the latest draft from the Ministry of Finance focuses solely on the Active Pension, now rebranded as the “Active Bonus”. The previously included provision for tax-free overtime bonuses is no longer present.
A spokesperson for the Federal Ministry of Finance stated that a draft bill concerning the Active Bonus will be presented “in the near future”. Regarding the overtime bonus tax exemption, the spokesperson referred to its inclusion within the existing coalition agreement, adding that its implementation would involve close consultation with social partners – a reference to employer associations and trade unions, who have previously expressed reservations about the proposal.
The conservative CDU/CSU faction (the “Union”) remains committed to introducing both the Active Pension and the tax exemption for overtime bonuses together, at the start of 2026. “We expect it to be implemented” stated Fritz Güntzler, the faction’s financial policy spokesperson, expressing surprise at the omission of the overtime bonus exemption from the current draft.
