German draft amendments for permanent 7% reduced VAT rate from 1 January 2026
The German Ministry of Finance has issued draft Tax Amendments Act 2025 which includes bringing back permanently the 7% reduced VAT rate for food sales by hospitality businesses.
The effective date will be 1 January 2026.
This was last in place until 1 January 2024 as a COVID-relief from 2020 to help restaurants and cafes during the pandemic. The legislative changes need to be approved by the Cabinet, and then go for parliamentary approval.
The VAT boost was contained within the new coalition government’s paper on economic policies.
Jan 2024: COVID cut from 19% to 7% on restaurants, cafes and catering rolled over until end of 2023 on inflation worries
As part of a €65 billion relief measures, including cutting VAT on gas to 7%, German is to extend the COVID-19 cut on hospitality services. This reduction from the standard 19% rate to 7% reduced was due to expire on 31 December 2022. This is the second extension of the tax subsidy for food supplied in restaurants, cafes and catering services.
The Federal Council (Bundesrat) has now approved the change, and it will be gazetted.
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Original German restaurant VAT 7% rate was due to end 31 December 2022
The VAT rate on restaurants and catering was cut from the standard rate to the reduced rate until 31 December 2022 (5% for 2020; 7% for 2021). The temporary cut in VAT on restaurant services was first planned to end on 30 June 2021. It was then extended until the last deadline, 31 December 2022.
European inflation VAT cuts are being brought forward as inflation surpasses recent records.
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