Legal Changes in 2025

A number of legislative changes have come into force since the beginning of the year, with more to follow in the course of 2025. Some legislative initiatives that were expected to take effect at the beginning of 2025 remain unimplemented due to the failure of the federal government. It is unclear whether and how these legislative initiatives come into force. Therefore, it remains important to keep an eye on further developments. Below, we provide a brief overview of the key changes for 2025 that entrepreneurs should be aware of, with tax changes only being presented selectively.

1. Product Safety Regulation and Product Liability Directive

The Product Safety Regulation (EU) 2023/988 came into force on December 13, 2024. It applies to all products intended for supply to consumers, unless they are already subject to more specific EU product safety regulations. Medical devices, food, animal feed and antiques, for example, are excluded. The regulation sets out obligations for manufacturers, importers and distributors with regard to product safety, e.g. traceability along the supply chain and reporting accidents and safety problems to the competent authorities and the manufacturer.

The Product Safety Regulation is flanked by the new Product Liability Directive (EU) 2024/2853, which now also takes into account new technologies (in particular artificial intelligence) and new business models in the circular economy. Software is now explicitly covered and product liability also extends to digital services in connection with products. Changes have also been made regarding the relevant point in time for determining a product's defectiveness. Up so far, only the placing on the market has been taken into account. In future, the point in time may be postponed if the product is still subject to the manufacturer's control, e.g. due to updates or upgrades

New presumption rules will make it easier for consumers to provide evidence and, in future, companies against whom claims are made will have to disclose evidence once the plausibility of the claim has been verified. This introduces a legal concept familiar from U.S. law, specifically "discovery and disclosure," into German procedural law. The Product Liability Directive must be transposed into national law by December 9, 2026.

2. NIS-2 Directive and Cyber Resilience Ordinance

The EU's second Network and Information Security Directive ("NIS-2-Directive"), which should have been transposed into national law by October 17, 2024, is intended to strengthen protection against cyberattacks and targeted hacker attacks. So far, however, there is only a draft bill, meaning that implementation will probably not take place until after the new elections in February. Around 30,000 companies, and therefore more than before, are likely to fall within the scope of the NIS-2-Directive. They must take appropriate, proportionate and effective technical and organizational measures to prevent disruptions to the availability, integrity, authenticity and confidentiality of their IT systems, components and processes. At the same time, they should limit the impact of security incidents on their own and other services. In the event of breaches, the management may be held personally responsible.

While the NIS 2 Directive and the Regulation (EU) 2022/2554 on digital operational resilience in the financial sector ("DORA") define industry-specific requirements, the Cyber Resilience Regulation ("CR Regulation"), which came into force on December 11, 2024, obliges companies along the entire supply chain of software and hardware products that are connected to networks to secure their products and processes against cyberattacks. The main obligations include regular security updates and the introduction of vulnerability management. However, implementation will take place in several stages. Companies will have until September 2026 to prepare for the requirement to report security vulnerabilities.

3. Regulation of Artificial Intelligence

From February 2, 2025, the first bans on unlawful use of artificial intelligence ("AI"), such as use for subliminal influence, exploitation of vulnerability and social assessment leading to unjustified disadvantages, will apply in accordance with AI Regulation 2024/1689. With a risk-based approach, the EU wants to strengthen the citizens' trust in this technology and at the same time prevent AI practices that are incompatible with the fundamental values of the EU. The provisions of the AI Regulation will enter into force gradually. From August 2025, the obligations for GPAI systems ("General Purpose Artificial Intelligence") will take effect.

4. Obligation for Sustainability Reports

According to the Corporate Sustainability Reporting Directive (EU) 2022/2464 ("CSR Directive"), companies are required to report on how they deal with social and environmental challenges. For financial years beginning on or after January 1, 2025, all large corporations and equivalent companies that were not previously required to report must prepare a sustainability report for the first time. In this report, they must report on the impact of their activities on society, the environment and the climate as well as the impact on their company, such as the negative financial consequences of climate change. Capital market-oriented small and medium-sized enterprises (SMEs) must prepare a sustainability report in accordance with CSR requirements for financial years beginning on or after January 1, 2026. However, even companies that are not directly required to report can come into contact with the CSR Directive if they are part of the supply chain of a company that is required to report.

5. Obligation to e-invoice, Annual Tax Act 2024 and Small Business Regulation

Since January 1, 2025, the ability to receive e-invoices in B2B transactions has been mandatory. However, transitional regulations, which we already informed you about in July of last year, remain in place. E-invoices are invoices in a structured electronic format that enables electronic transmission, receipt and evaluation. Invoices in PDF format no longer meet these requirements. Until the end of 2026, entrepreneurs may continue to use other invoice formats, such as PDF or paper documents, for their B2B sales, provided the invoice recipient expressly agrees to the use of non-structured formats.

As part of the Annual Tax Act, the German legislator also passed a whole series of other changes. One important change is the standardization of tax exemptions for photovoltaic systems, which previously only benefited single-family homes. In future, the tax exemption will apply to all types of buildings with a maximum gross output of up to 30 kWp.

Until now, only entrepreneurs based in Germany were able to make use of the small business regulation under VAT law in Germany. From January 1, 2025, entrepreneurs based in the rest of the EU can also apply for the small business regulation in Germany. A special notification procedure has been introduced in Section 19a of the German VAT Act (“UStG”) for this purpose.

6. Labor Law

The Bureaucracy Reduction Act IV aims to reduce the administrative burden on companies. Since January 1, 2025, employers have also been allowed to use email to provide information about key contractual conditions of the employment relationship and to transmit changes to employment contracts. Signing with paper and wet ink is no longer necessary. However, the employee must be able to access and save the digital employment contract and print it out. The employer is also obliged to ask the employee to provide proof of receipt upon transmission. Employers must also send written proof immediately upon request by the employee. However, certain sectors are still exempt from the formal simplifications to combat illegal employment and the strict written form requirement continues to apply to certain contractual content (e.g. fixed-term agreements or post-contractual non-competition clauses).

In addition, the minimum wage was increased to 12.82 euros per hour as of January 1, 2025. The minimum training allowance has also risen to 682 euros per month. The assessment threshold for parental allowance will be further reduced for births from April 1, 2025. Parents will no longer receive parental allowance above a gross income of 175,000 euros.

7. Accessibility of products, services and apps

The Accessibility Reinforcement Act (“BFSG”) comes into force on June 28, 2025 and obliges companies to make certain products and services accessible in order to facilitate access for people with disabilities. Among others, manufacturers, importers and retailers of computers, smartphones and self-service terminals as well as providers of websites with interaction options, telephone services and digital banking services are obliged to comply. This will affect, among others, all web shops and apps for consumers. The law provides for exemptions for micro-enterprises with fewer than 10 employees and an annual turnover or annual balance sheet total of no more than 2 million euros.

8. Deforestation Regulation

The EU Deforestation Regulation 2023/1115 already came into force on June 29, 2023. After the end of the 18-month transitional period, it was supposed to apply to a large number of companies from December 30, 2024. However, at the proposal of the EU Commission, the EU Parliament has agreed to a postponement of a further 12 months. The regulation will therefore apply from December 30, 2025 and obliges traders and market participants to comply with far-reaching due diligence obligations and introduce compliance measures. In particular, they have to ensure that relevant raw materials and/or products are deforestation-free within the meaning of the EU Deforestation Regulation, are produced in accordance with the relevant legislation of the country of production and that a corresponding due diligence declaration is in place. We have already reported on the details in another article for our newsletter.

9. Customs Law and Foreign Trade Regulations

A new version of the Combined Nomenclature (CN) has been in force since January 1, 2025. The changes affect trade in information technology goods, biofuels and tomatoes, among other things. In addition, China has tightened its export control regulations for dual-use goods at the end of 2024, which may also have an impact on the compliance of companies in Germany.

Small and medium-sized enterprises may benefit from the increase in the reporting thresholds for transactions. For payments to/from foreigners, a reporting obligation now applies from a value of 50,000 euros (previously 12,000 euros). In future, domestic companies will only have to report direct investment holdings and receivables from and liabilities to foreigners if the amount of the receivable or the equivalent value exceeds 6 million euros.

10. Packaging Regulation

The Regulation (EU) 2025/40 of the European Parliament and of the Council of December 19, 2024 on packaging and packaging waste (“Packaging Regulation”) was published in the EU Official Gazette on January 22, 2025 and will apply in its main part from August 12, 2026. With this Regulation, the EU is introducing requirements for the sustainability and design of packaging that go beyond the previous requirements. In future, packaging must be designed in such a way that the quality of the packaging waste is such that it can replace primary raw materials in further recycling compared to the source materials. Packaging must also be designed in such a way that it can be separated without impairing the recyclability of other waste streams. 

11. Planned changes

Further plans have already been announced at European level that companies should keep an eye on. 

The changes brought about by the Battery Law Implementation Act (“BattDG”), which is intended to replace the Batteries Act (“BattG”), are also related to the circular economy. In line with the EU Battery Regulation, which has been in force since the beginning of last year, the proper collection and recycling of used batteries is to be promoted, particularly with regard to the waste phase. To this end, it is primarily the manufacturers responsible for the product who are held accountable for all batteries. The original plan was for the BattDG to come into force on August 18, 2025. However, this would require the law to be passed before the new elections in February.

The former government had also planned to extend mandatory labeling to out-of-home catering by amending the Animal Husbandry Labeling Act (Tierhaltungskennzeichnungsgesetz). This would be of considerable practical relevance for the gastronomy in particular. It is not possible to predict at this stage whether this plan will be pursued further.

Conclusion

The year 2025 will bring some important changes that entrepreneurs will have to prepare for. Some changes are not expected to be implemented until the second half of the year - also in view of the upcoming elections in Germany. We will keep you up to date on further developments and will be happy to assist you with any questions you may have in the new year.