After months of debate, Germany has finalized a key tax decision for the hospitality sector. Germany is set to apply a permanently 7% VAT rate on restaurant and catering services, excluding beverages, starting 1 January 2026. This change, part of the 2025 Tax Amendment Act (Steueränderungsgesetz 2025), aims to simplify VAT administration and provide lasting support for the hospitality industry.
What’s Changing in Germany’s VAT System
During the pandemic, Germany temporarily lowered VAT to help restaurants cope with economic pressures. Once the reduced rate expired, the standard 19% VAT returned—placing renewed strain on many hospitality businesses.
The new 7% rate is a permanent solution designed to relieve financial pressure, align Germany with EU standards, and simplify tax processes for restaurants and caterers.
For many small businesses, this move could mean the difference between survival and closure
Key Highlights of the 2026 VAT Reform
1. 7% VAT Becomes the New Normal for Food Services
From 1 January 2026, restaurant and catering services will be taxed at 7%, while beverages will continue to attract the 19% standard rate, under Section 12(2)(15) of the German VAT Act.
2. Economic Relief for the Hospitality Sector
This change will provide ongoing support for restaurants, cafés, and catering companies that have faced rising costs and declining margins since the pandemic.
3. Simplified VAT Compliance
The reform eliminates the complicated distinction between dine-in and takeaway services. With one unified rate, VAT administration becomes more efficient and transparent.
4. Cross-Border Competitiveness
Many neighboring countries, such as France and Austria, already apply lower VAT rates on food services. Germany’s decision helps businesses near its borders remain competitive.
This alignment helps border-region restaurants compete fairly with their EU neighbors
Implementation Guidelines from the Finance Ministry
The Federal Ministry of Finance (BMF) will publish administrative guidance before the new VAT rate takes effect. Expected clarifications include:
- Combination Offers: Guidance on allocating VAT for set menus that include beverages.
For instance, a €15 lunch combo including a drink may be split between the 7% and 19% VAT rates based on item value.
- Restaurant Vouchers: Encouragement to switch to multi-purpose vouchers, delaying VAT liability until redemption in 2026.
Other VAT Developments in Germany
Germany continues to adjust VAT policy to address economic and environmental goals:
- Energy Supplies: A temporary 7% VAT rate on gas and heating network supplies until 31 March 2024.
- Photovoltaic Systems: A 0% VAT rate for small-scale solar installations (up to 30 kW) near residential areas since January 2023, encouraging renewable energy investments.
These measures show how Germany uses VAT flexibility to stimulate economic resilience and sustainability.
Together, these adjustments show a broader trend: Germany is using VAT reform as a tool for both economic recovery and sustainability.
Preparing for the 2026 VAT Adjustment
Hospitality and food service businesses should start preparing now:
- Review your menu pricing and invoicing setup.
- Make sure your POS and accounting software can handle dual VAT rates.
- Train your staff early to avoid confusion in 2026.
The legislative approval is expected by late 2025, providing ample time for adaptation.
Safari Star Insight
Germany’s decision to implement a permanent 7% VAT rate for restaurants marks a significant win for the hospitality industry—reducing administrative complexity and supporting long-term growth.
At Safari Star, we help global companies stay informed and compliant with evolving tax laws and trade policies across Europe and the Middle East.
Need help assessing your VAT readiness? Our experts at Safari Star can guide you step by step.
Frequently Asked Questions
- When does the 7% VAT rate start in Germany?
The reduced VAT rate takes effect from 1 January 2026, following the 2025 Tax Amendment Act. - Are beverages included in the 7% VAT rate?
No. Only food services qualify for the reduced rate; beverages remain at 19% VAT. - How can restaurants prepare for the VAT change?
Update your pricing, POS systems, and voucher programs well before the 2026 deadline to ensure compliance. - Will the 7% VAT apply to take-away meals?
Yes, the reduced rate applies to all food services, including dine-in and takeaway, making compliance simpler for businesses.