Germany to Introduce 7% VAT Rate for Restaurants from 2026

As part of the 2025 Tax Amendment Act (Steueränderungsgesetz 2025), the German government is introducing a permanent reduced VAT rate of 7% for restaurant and catering services, excluding beverages, effective 1 January 2026. The measure aims to strengthen the gastronomy sector and eliminate long-standing VAT compliance challenges in food services.

New Permanent Reduced VAT Rate from January 2026

Under the new sec. 12 para. 2 no. 15 of the German VAT Act, the 7% VAT rate will apply permanently to restaurant and catering services, excluding the sale of beverages, from 1 January 2026.

The measure follows the temporary VAT reduction implemented during the COVID-19 pandemic. Between July 2020 and December 2023, Germany applied reduced VAT rates on restaurant and catering services to support the struggling hospitality industry. The initial rate was even lowered to 5% in 2020, with the support of the Federal Ministry of Finance (BMF). However, as of January 2024, the standard VAT rate returned.

Now, facing continued economic pressure and competitive disadvantages near national borders, the government is acting again—this time with a long-term solution.

These are the key objectives of the measure:

• Economic Support: The main goal is to provide continued support to the hospitality industry, which remains under financial pressure.
• Avoiding Competitive Distortion: The measure aims to align Germany with neighbouring countries, many of which already offer reduced VAT rates on food services, helping restaurants near borders to remain competitive.
• Simplifying VAT Treatment: By applying a unified reduced rate, the complex VAT distinction between dine-in and takeaway services—a long-standing administrative headache—will finally be resolved.

To ensure effective implementation, the Federal Ministry of Finance is expected to issue an administrative letter (BMF-Schreiben). This would provide clarification on:

• Combination offers (e.g., menus including drinks): Guidance on flat-rate attribution of VAT to beverage components would help businesses correctly apply the standard rate only to drinks.
• Restaurant vouchers: Businesses are advised to switch to multi-purpose vouchers, which delay VAT liability until redemption—allowing redemption in 2026 to benefit from the reduced rate.

This permanent VAT reduction for restaurant and catering services is a landmark move for the German hospitality sector. Besides providing economic relief, it removes administrative burdens and aligns German VAT rules with other EU countries.

Businesses in the hospitality and food service sectors should begin preparing now, particularly in how they structure menus, vouchers, and pricing. Legislative approval is expected before the end of 2025, with changes taking effect from 1 January 2026. Take a look at the .

2023 Changes on VAT Rates in Germany

Following the trend of changing VAT rates to combat the raise of inflation and economic distress in 2023, Germany released the following measures:

• Temporary VAT rate reduction to 7% on the supplies of energy: this refers to supplies of gas – natural gas and biogas, via the gas network and supplies of heat via a heating network. The reduced VAT rate applies from 1 October 2022 to 31 March 2024. This measure is accompanied by regulations to simplify the implementation of the reduced rates during the period agreed.
• Restaurant and catering services have been subject to a reduced VAT rate of 7% since July 2020 as a result of the pandemic crisis. The government agreed on a new extension of the reduced rate for these services until 31 December 2023.
• Zero-rated supplies of services connected to photovoltaic systems and their main components from January 2023. To apply the 0% VAT rate, the photovoltaic system must be installed on or near residential areas; alternatively, the capacity of the plant must not exceed 30 kW. The supplies of goods and services in scope are zero-rated, meaning that the supplies are subject to 0% of VAT, but the supplier can deduct the VAT incurred on the economic activity – this is the main difference with the exempt supplies. Please consider checking the specific Law details to verify if your supplies and considered within the scope subject to a zero rating.