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Germany reintroduces reduced VAT for restaurant and catering services from 2026

Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026

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What Businesses Need to Know

From 1 January 2026, Germany will permanently reintroduce the reduced VAT rate of 7% for restaurant and catering services, excluding beverages. The German Ministry of Finance (BMF) has published detailed administrative guidance clarifying how the reduced rate must be applied in practice — in particular for package prices, buffets and all-inclusive offers.

For many businesses in the hospitality, catering and event sectors, this marks a welcome return to a familiar VAT structure. However, the new guidance also introduces important allocation rules that must be implemented correctly to avoid VAT risks. 

This article summarises the key VAT changes as of 1 January 2026 and explains their practical implications. 

Reduced VAT Rate on Food – The Basic Rule from 2026

As of 1 January 2026: 
  • Restaurant and catering services involving the supply of food are subject to the reduced VAT rate of 7%.
  • Beverages, whether alcoholic or non-alcoholic, remain subject to the standard VAT rate of 19%.

Food

Reduced VAT rate

7%

Beverages

Standard VAT rate

19%

This distinction applies regardless of whether the food is:
  • consumed on the premises,
  • provided as part of catering services, 
  • or included in a larger service package. 

The rule mirrors the system that applied temporarily between 2020 and 2023, but is now intended to be permanent. 

The Practical Challenge: Package Prices Including Food and Drinks

In practice, many businesses do not charge separate prices for food and beverages. Typical examples include:

Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026

Without simplification rules, businesses would be required to split the total price according to actual individual selling prices — a task that is often impractical and highly controversial in VAT audits. 
 
To address this, the BMF has introduced explicit non-objection (“safe harbour”) rules in the German VAT Application Decree (UStAE).

New 30% Allocation Rule for Food-and-Drink Packages - Section 10.1 (12) UStAE

For restaurant and catering services that include food and beverages for a single package price, the tax authorities will not object if businesses apply the following allocation:

Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026
Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026
This rule applies, for example, to:
  • buffets,
  • all-inclusive catering offers,
  • flat-rate food and drink arrangements.

Important:

  • The rule is optional, not mandatory.
  • Businesses may apply a different allocation if they can reliably substantiate it.
  • The 30% rule provides audit security and administrative simplicity.

The Often Overlooked Rule: Section 12.16 UStAE and the 15% Allocation

In addition to the gastronomy-specific rule, the BMF has confirmed and updated a general allocation rule in Section 12.16 (12) sentence 2 UStAE.

What does this rule cover?

It applies to single package prices for composite supplies where:

  • different VAT rates apply to different elements,
  • the supply is considered economically uniform,
  • a precise allocation based on individual prices is not feasible.

The Simplification Rule 
In such cases, it is not objected to if:

Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026
Germany-reintroduces-reduced-VAT-for-restaurant-and-catering-services-from-2026

This rule is not limited to gastronomy and can apply, for example, to:

  • hotel packages,
  • hospitality services with ancillary taxable elements,
  • bundled service offerings with mixed VAT rates.
Relationship to the 30% Rule 
  • Section 10.1 UStAE (30%) is a specific rule for food and drink.
  • Section 12.16 UStAE (15%) is a general fallback rule for mixed-rate package supplies.

Where both could theoretically apply, the more specific rule (30%) generally takes precedence

Transitional Rule for New Year’s Eve 2025/2026

To avoid disputes around the change of VAT rates at midnight, the BMF has introduced a pragmatic transitional rule:

  • For restaurant and catering services performed during the night of 31 December 2025 to 1 January 2026, it will not be objected to if businesses apply the standard VAT rate of 19% to the entire supply.

This is particularly relevant for:

  • New Year’s Eve events,
  • gala dinners,
  • overnight catering services.

Key Action Points for Businesses

Businesses affected by the change should: 

  • Update VAT logic in POS and ERP systems as of 1 January 2026
  • Decide whether to apply the 30% or 15% simplification rules
  • Ensure consistent application of the chosen method
  • Review contracts, menus and invoices for correct VAT disclosure
  • Document the allocation method for VAT audit purposes

Conclusion

The reintroduction of the reduced VAT rate for restaurant and catering services from 1 January 2026 brings long-awaited relief for the hospitality sector. At the same time, the new administrative guidance makes correct VAT allocation more important than ever.

The newly confirmed 30% and 15% safe-harbour rules provide valuable legal certainty — provided they are applied correctly and consistently.

VAT4U supports businesses across Europe in implementing VAT changes efficiently, audit-securely and with minimal operational disruption.

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