Germany: Permanent Reduction in VAT on Food

(eap) It is now a settled matter: from the turn of the year, value-added tax on food served in the hospitality sector in Germany – excluding beverage sales – is set to be permanently reduced from 19 to seven percent. The German Bundesrat approved the Tax Amendment Act on Friday last week, with the legislation scheduled to enter into force on 1 January 2026. The reduced tax rate is intended to benefit not only traditional restaurants and hotels, but also, among others, bakeries and catering companies. The aim of the reduction is to ease the burden on the hospitality sector, which is already under pressure in a period characterized by economic uncertainty, high operating costs and weakening consumer demand. Overall, the federal government reportedly expects annual relief of around 3.6 billion euros for hospitality businesses as well as for consumers. However, many operators reportedly reject a blanket price reduction across their entire range due to overall cost increases. Instead, the focus is more likely to be on price stability as a result of the tax cut.

With revenues of more than 480 billion euros and over 6.1 million employees, the hospitality sector makes a significant contribution to the national economy, according to Homeira Amiri, Chair of the Supervisory Board of the Denkfabrik Zukunft der Gastwelt (DZG). Dr. Marcel Klinge, also Chair of the Board and spokesperson of the DZG, described the decision as an important signal of economic common sense: “[…] The final approval by the Bundesrat is more than a formal step; it is a clear commitment to fair competitive conditions, safeguarding employment and stable cities and regions. The reduction to seven percent is not preferential treatment, but an economically necessary measure to secure businesses and jobs. […]”

The VDFU (German Association of Amusement Parks and Attractions) also welcomed the Bundesrat’s approval and the associated relief for gastronomic offerings in leisure and attractions facilities: “Food and beverage offerings are an essential component of leisure and attractions facilities. They are integrated into themed environments and make a significant contribution to the overall guest experience. The permanent reduction in VAT helps to keep these offerings economically viable under current conditions and to safeguard leisure as a form of social balance for broad segments of the population,” said VDFU Managing Director Jürgen Gevers. With its campaign “Die Faire Sieben”, the association has also been advocating for some time for the reduced VAT rate of seven percent to be extended to admission charges for leisure parks. ■