Tax Exemption for Catering Services and Commuters to Take Effect Starting 2026
The German government has unveiled a draft of the Tax Adjustment Act 2025, which includes significant changes to various allowances and tax relief measures. Here's a rundown of the key points:
Starting from January 2026, the commuter allowance for the 21st kilometer and beyond will increase to 38 cents per kilometer, and the allowance for the first kilometer will rise as well, though the exact amount is yet to be disclosed. The volunteer allowance will see an increase from 840 euros to 960 euros, while the coach tax allowance will be raised from 3,000 euros to 3,300 euros.
These changes are aimed at strengthening voluntary commitment and providing tax fairness towards take-away food and food delivery, according to the managing director of the industry association Dehoga, Ingrid Hartges. The hospitality industry will also receive tax relief, with a permanent reduction of value-added tax on food from 19% to 7%.
However, environmental associations have raised concerns that these increases mainly benefit the top ten percent of incomes. People with low incomes, who do not pay income tax, will likely not benefit from the increases in the commuter allowance.
The aim of the value-added tax reduction for food in the hospitality industry is to economically support the sector. The federal government plans to financially relieve the federal states for the planned tax reductions on the transportation cost allowance and the reduction of VAT in gastronomy.
The draft has entered internal government consultation, and the federal government has promised billions in compensation to the states for potential tax losses resulting from these reliefs. However, Federal Finance Minister Lars Klingbeil (SPD) has stated that there is no room for maneuver in relieving the states of tax losses due to significant gaps in the federal budget.
The reduced value-added tax rate for food was raised again at the beginning of 2024. Customers should not expect prices to fall across the board, according to the trade union NGG. Both passing on the tax reduction to consumers and additional investments are possible, according to the draft.
It is uncertain whether there will be price reductions in restaurants due to various factors such as food prices, rising wages, and other costs. The federal government and states may face conflicts due to these tax losses.
In conclusion, the Tax Adjustment Act 2025 presents a series of changes affecting various sectors, with the aim of strengthening voluntary commitment and supporting the hospitality industry. While these changes may bring benefits, they also pose challenges, particularly in terms of potential tax losses for the federal and state governments.
