Germany to permanently reduce VAT on restaurant and catering services to 7% from 1.1.2026

November 18, 2025 EU-Umsatzsteuer-Update

The German government has announced a significant tax reform aimed at supporting the hospitality sector: starting January 1, 2026, the VAT rate on food served in restaurants and catering services will be permanently reduced from 19% to 7%. This measure, part of the 2025 Tax Amendment Act, excludes beverages, which will remain subject to the standard 19% VAT rate.

Key details of the reform

  • Effective Date: January 1, 2026
  • Scope: Applies to food served in restaurants, cafés, and catering services
  • Exclusions: Beverages remain taxed at 19%

Background, history and rationale

The decision follows years of debate and temporary relief measures introduced during the COVID-19 pandemic. Initially, the reduced VAT rate was implemented as an emergency measure to help restaurants and cafés survive lockdowns and economic downturns. After reverting to the standard rate in 2024, continued economic pressure and industry lobbying prompted the government to make the reduction permanent.

Historical development of VAT rate applicable on restaurant and catering services:

19%      up until 30.6.2020

5%         1.7.2020 – 31.12.2020

7%         1.1.2021 – 31.12.2023

19%      1.1.2024 – 31.12.2025

7%         1.1.2026 –

Impact on businesses and consumers

For restaurants and catering companies, the reduced VAT rate offers an opportunity to lower prices and attract customers. However, whether consumers will see significant price reductions depends on how businesses choose to pass on the savings. Restaurateurs must also update invoicing systems, accounting processes, and pricing strategies to comply with the new rules.

Economic and competitive benefits

The reform aims to support the hospitality industry by easing financial burdens and stabilizing employment. At the same time, it should enhance competitiveness for German restaurants, especially those near borders where all neighbouring countries already apply reduced VAT rates.

Next steps for businesses

Companies should use the “transition period” until January to

  • Update their IT and POS systems for the new VAT rate.
  • Review pricing strategies and communication plans towards their customers.
  • Ensure proper documentation and compliance with invoicing requirements.
Archiv