To support the Clean Industrial Deal (CID), the European Commission has put forward a Recommendation on Tax Incentives to support the Clean Industrial Deal (CID), a cornerstone of the EU’s strategy to build a competitive, climate-neutral industrial base. The initiative, unveiled today as part of the CID implementation package, outlines a comprehensive framework for Member States to design cost-effective tax measures that stimulate investment in clean technologies and industrial decarbonisation.
Key Provisions of the Tax Incentive Recommendation
The Recommendation advocates for two core instruments to drive clean investment:
1. Accelerated Depreciation, up to Immediate Expensing:
- Allows companies to deduct the full cost of eligible clean technology investments (e.g., renewable energy systems, energy-efficient machinery) faster, or even in the year of purchase or lease. This effectively reduces initial tax liabilities, improving cash flow and lowering barriers to green investment. Where possible, accelerated depreciation should be accompanied by appropriate rules for carrying loses forward.
- The Recommendation encourages the use of tax incentives in full alignment with the Clean Industrial State Aid Framework (CISAF), which permits such measures to be combined with other state aid or EU funds without requiring a gross grant equivalent calculation.
2. Targeted Tax Credits:
- Direct reductions in corporate tax liabilities create a strong incentive for investments in strategic sectors, such as manufacturing of clean technologies and industrial decarbonisation projects. Where feasible, Member States are encouraged to make the tax credits refundable or allow them to be offset against other national taxes.
- Under CISAF, tax credits for projects are capped at a specific amount per project, and subject to maximum aid intensities.
Principles for Effective Tax Incentive Design
The Recommendation focuses on the following principles to ensure tax measures are cost-effective, simple, and timely:
- Targeted Support: Incentives apply only to clean technologies and industrial decarbonisation, and exclude fossil fuel-related investments.
- Simplicity and Certainty: Measures must be easy for companies and tax authorities to implement, with clear eligibility criteria.
- Timely: Incentives should provide timely support to companies making investment decisions.
Alignment with State Aid Rules
Tax incentives introduced under the Recommendation must comply with EU state aid regulations. For measures falling under the Clean Industrial Deal State aid Framework (CISAF), conditions for compatibility with the internal market are set out in CISAF Section 5 for industrial decarbonisation and CISAF Section 6 for clean technologies. For other incentives, Member States may rely on exemptions under Commission Regulation (EU) No 651/2014 (GBER).
Strategic Impact
The Clean Industrial Deal, launched in February 2025, aims to establish a resilient, investable clean technology ecosystem in Europe. By aligning tax policy with climate goals, the Recommendation seeks to:
- Boost private investment in decarbonisation and clean manufacturing.
- Create a fair environment for companies adopting sustainable practices.
- Strengthen EU industrial competitiveness while meeting the 2050 climate neutrality target.
The Recommendation marks a pivotal step in transforming the EU’s industrial landscape. By leveraging tax incentives, the EU empowers businesses to lead the clean transition while ensuring fair competition. The principles outlined today will guide Member States in creating a coherent, impactful policy framework.
Q&A
What is the main goal of the Recommendation on Tax Incentives for the Clean Industrial Deal?
The recommendation aims to stimulate private investment in clean technologies and industrial decarbonisation by providing cost-effective tax measures such as accelerated depreciation (up to immediate expensing) and targeted tax credits. These tools reduce initial costs for companies adopting clean technologies (e.g., renewable energy, energy-efficient machinery) and align with EU climate goals to strengthen competitiveness and meet the 2050 net-zero target.
How do accelerated depreciation/immediate expensing and tax credits work to support clean investment?
- Accelerated depreciation allows for faster deduction of eligible clean investments costs, and fully in the year of purchase in case of immediate expensing, improving cash flow and reducing tax liabilities upfront.
- Tax credits provide direct reductions in corporate tax liability for investments in strategic sectors (e.g., clean manufacturing, decarbonisation projects). For example, projects in "assisted areas" may qualify for higher support.
Both measures are designed to be simple, certain, and timely to encourage businesses to prioritise sustainable investments.
Are these tax incentives compliant with EU state aid rules?
Yes. The recommendation is aligned with the Clean Industrial State Aid Framework (CISAF). Tax incentives under CISAF are compatible with the internal market if they meet conditions such as caps on aid intensity and on eligibility. For non-CISAF measures, Member States may rely on exemptions under Commission Regulation (EU) No 651/2014 (GBER), which could for example be used for support to zero-emission vehicles.
Next Steps
Member States are asked to report on their adoption of relevant measures, with the European Commission facilitating exchanges on best practices, regularly monitoring and reporting on how tax incentives are delivering clean investment and contributing to the broader goals of the Clean Industrial Deal. This will help evaluate the effectiveness of tax incentives.
More information
Details
- Publication date
- 2 July 2025
- Author
- Directorate-General for Taxation and Customs Union