Clean Industrial Deal
In February 2025, the European Commission published the Clean Industrial Deal, a comprehensive action plan aimed at increasing both competitiveness and decarbonanisation of the EU. The Clean Industrial Deal aims at reaching the EU’s 2040 climate target of a 90% net reduction in greenhouse gas emissions, while reducing the dependency on third countries for raw materials. The European Commission announced in the Clean Industrial Deal that they would provide a recommendation on tax incentives for the Member States to aid these goals.
This recommendation provides practical guidance to national governments on how to align their tax systems with the EU’s climate and industrial objectives. The recommendation complements the Clean Industrial State Aid Framework (CISAF), which sets out how Member States can design State aid measures to support the same objectives.
The recommendation is not legally binding but assists the tax policy in EU Member States. It establishes a set of common guiding principles for Member States to follow when designing and implementing tax incentives for clean investments. The design of these incentives should among others ensure that businesses receive timely and meaningful benefits for investment decisions in support of the green transition.
The recommended tax incentives are meant to apply only to clean technologies and industrial decarbonisation. Fossil fuel-related investments are excluded from the scope.
Accelerated tax depreciation for clean investments
A key component of the recommendation is the use of accelerated tax depreciation.
Member States are recommended to provide for accelerated depreciation in relation to costs incurred for the acquisition or lease of clean technology equipment. Member States are also recommended to prioritize the full and immediate depreciation of such costs, or alternatively the highest depreciation rate allowed under the national taxation rules. Moreover, taxpayers could be granted flexibility for accelerated depreciation of relevant costs, allowing them to decide on the depreciation schedule (‘discretionary depreciation’).
Lastly, Member States are recommended to consider also making zero-emission vehicles for corporate fleets eligible for accelerated depreciation.
Further tax measures to incentivise clean investments
Beyond depreciation, the recommendation also outlines further tax measures to enhance the attractiveness of clean investments. For example, Member States are recommended to provide tax relief in the form of tax credits for projects that expand manufacturing capacity in clean technologies and for industrial decarbonisation.
Tax credits should also support investments that reduce greenhouse gas emissions or improve the energy efficiency of industrial activities. Member States are further encouraged to incorporate the EU’s resilience policy objectives, which among others aim to reduce the EU’s dependence on thirdcountries. This can potentially also be in the form of tax credits. Any such rules must, however, be consistent with EU (State aid) law and other international obligations.
Lastly, the recommendation suggests making tax credits refundable if the tax credit is not exhausted within four years (with reference to the treatment of qualified refundable tax credits under the EU’s Pillar 2 Directive). Moreover, tax credits are recommended to be offset against a broader range of taxes, beyond just corporate income tax. Loss carry forward provisions are also highlighted as a valuable tool for supporting clean investments.
Next steps
As a next step, the European Commission invites Member States to notify the Commission by 31 December 2025 of any measures they have introduced or announced to implement the recommendation as well as of any similar measures already in place. We will monitor any relevant developments in this respect.
Should you have any queries or want to discuss the above, please contact your trusted adviser at Loyens & Loeff or one of the specialists mentioned below.
