Germany’s VAT Reform, effective January 1, 2026, makes the 7% VAT rate on restaurant food permanent, keeps drinks at 19%, and raises the nonprofit commercial exemption threshold to €50,000. The changes provide long-term stability for the hospitality sector and give charities more room for income generation, but businesses must update systems, train staff, and carefully track classifications to stay compliant.
German VAT Reform – Changes starting January 2026
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Germany
Author: Ivana Picajkić
Category:
Fiscal subject related
General information
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15693
Content accuracy validation date:
23.09.2025
Content accuracy validation time:
08:08h
Germany’s VAT Reform takes effect January 1, 2026. It introduces permanent changes that impact restaurants, charities, and nonprofits. Businesses in hospitality and nonprofit sectors should prepare early to stay compliant.
The reform is part of the Draft Tax Amendment Act 2025, approved by Germany’s government. Its main goal is to make temporary COVID measures permanent, simplify rules for nonprofits, and boost economic activity.
Main updates:
- Permanent 7% VAT on restaurant food – applies to food served in restaurants, cafés, and catering. Drinks stay at 19% VAT.
- Higher nonprofit commercial threshold – exemption rises from €45,000 to €50,000 per year.
Why does it matter?
- Hospitality sector stability – restaurants now have certainty to plan pricing and investments.
- More flexibility for charities – they can earn more from commercial activities without losing tax benefits.
Potential challenges:
- Food vs. drink classification – mixed menus and combos may cause disputes,
- System upgrades and training costs – businesses may face one-off expenses,
- Nonprofit monitoring – careful income tracking is needed to avoid losing exemptions.
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