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Germany’s new coalition government, led by the Christian Democratic Union (CDU) and Social Democratic Party (SPD), has confirmed the reintroduction of the 7% reduced VAT rate for food sold by hospitality businesses, effective from 1 January 2026.
The decision, announced on 9 April 2024, marks a return to a fiscal measure initially introduced during the COVID-19 pandemic to support restaurants, cafes, and catering services. The reduced rate, down from the standard 19%, was originally implemented in 2020 as part of pandemic relief efforts and remained in place through successive extensions until it expired on 1 January 2024.
The policy was among several economic initiatives outlined in the new coalition’s framework for economic revival and cost-of-living relief. The return of the reduced VAT is expected to provide targeted relief to Germany’s hospitality industry, which continues to face inflationary pressures and changing consumer behavior.
A Tax Tool for Recovery
The reintroduction of the 7% VAT rate follows a similar strategy employed during the pandemic, when the government used tax policy to cushion the blow for sectors hardest hit by lockdowns. In 2020, the VAT rate on food sold by restaurants and cafes was reduced to 5%, later adjusted to 7% in 2021, and was extended multiple times amid continued economic uncertainty.
As part of broader stimulus packages, such as the €65 billion inflation relief programme, Germany had also temporarily cut VAT on gas and extended tax relief to other essential sectors.
Legislative Backing and Timeline
The measure has been approved by the Bundesrat (Federal Council) and is now set for publication in the official gazette. It will come into effect from the beginning of 2026, giving businesses in the hospitality sector ample time to prepare for the adjustment.
The temporary nature of the previous VAT reduction drew criticism from industry groups, which argued that unpredictable tax policy hindered long-term planning. The reintroduction of the reduced rate as a fixed policy from 2026 may be seen as an effort to restore stability and competitiveness in the sector.
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