Germany 2026 Tax Reform: Permanent 7% VAT for Restaurants, Higher Charitable Allowances

The German Ministry of Finance has officially published the Draft Tax Amendment Act 2025, confirming that restaurant and catering services—excluding beverages—will benefit from the reduced 7% VAT rate from January 1, 2026. This measure, initially introduced as a pandemic relief, now becomes a permanent fixture of the tax code, bringing certainty for the hospitality sector and supporting economic recovery[Gesetz].

Permanent 7% VAT Rate for Restaurant & Catering Services

Scope of Measure

• The 7% VAT rate will apply permanently to food served in restaurants and catering venues across Germany.

• Beverages are excluded from the reduced rate and will continue to be taxed at the standard 19% rate.

• This move marks a transition from temporary relief to long-term support for hospitality businesses, which have advocated strongly for the measure since the pandemic[Gesetz].

Sector Impact

• Restaurants, catering companies, and their clients benefit from lower costs and simpler VAT compliance.

• The measure aims to improve affordability for consumers, sustain employment, and underpin investment in the sector.

Expanded Support for Charitable Activities

Commercial Activity Exemption for Non-Profits

• The exemption threshold for non-profits’ commercial activities rises from EUR 45,000 to EUR 50,000 as of 2026.

• This enables charitable organizations to undertake more fundraising or business ventures without jeopardizing their nonprofit status or facing unrelated business income tax[Gesetz].

Trainer and Volunteer Allowances

• The trainer (“Übungsleiter”) allowance for individuals active in educational, charitable, or sports organizations increases to EUR 3,300 (up from EUR 3,000).

• The volunteer (“Ehrenamtspauschale”) allowance remains EUR 960.

• These allowances provide tax-free compensation for part-time community involvement and are designed to stimulate greater participation in Germany’s volunteer sector[Gesetz].

Practical Implications for Businesses and Nonprofits

• Hospitality Businesses: Update your booking, accounting, and POS systems to reflect the permanent 7% VAT rate on food from January 2026; retain the 19% standard rate on all beverages.

• Charitable Organizations: Monitor gross annual commercial income and utilize the higher EUR 50,000 threshold for tax exemption; review compensation schemes for volunteers and trainers in light of increased allowance limits.

• Individuals: Trainers and volunteers can claim higher non-taxable reimbursements for eligible activities, with part-time involvement in charities or sports clubs incentivized.

Timeline

All measures from the Draft Tax Amendment Act 2025 are scheduled to enter into force on 1 January 2026, providing advance notice and certainty for planning[Gesetz].