Tax exemptions for catering and commuting services will commence from 2026
The German federal government has announced a comprehensive tax reform, set to take effect from January 1, 2026. The reform includes significant tax reductions for businesses, aiming to economically support certain sectors and individuals.
One of the key changes is the permanent lowering of the Value-Added Tax (VAT) on food served in gastronomy from 19% to 7%. This move is intended to provide relief to the restaurant industry, which has been struggling due to the economic impact of the pandemic. However, this reduction is expected to result in tax revenue losses of around 4.8 billion euros in 2026, shared almost equally between the federal government and the states.
To enable the approval of these changes, the federal government has promised the states billions in compensation. The federal finance minister, however, does not see possibilities for the federal government to relieve the states of tax losses from the increase in the commuter allowance and the VAT reduction in the catering industry.
Another significant change is the increase in the commuter allowance. Currently set at 30 cents per kilometer for the first 20 kilometers and 38 cents from the 21st kilometer, the allowance will be increased to 38 cents from the first kilometer. This change is expected to benefit commuters across the country.
In addition, the coach tax allowance will be increased from 3,000 euros to 3,300 euros starting January 2026, and the volunteer allowance will be increased from 840 euros to 960 euros in the same period. These increases are aimed at strengthening voluntary commitment.
The relief for food to take away and food delivery in restaurants finally provides tax fairness with a VAT rate of 7%. However, it remains uncertain whether there will be price reductions in restaurants due to factors like food price development, employee wages, and other costs.
The Tax Adjustment Act 2025 draft, which includes these changes, has been made available and is under internal government consultation. The aim of these relief measures is to stimulate economic growth and support sectors and individuals affected by the ongoing economic challenges. The reforms are likely to cause further conflicts between the federal government and the states, but there are no public reports of serious disputes between the two parties against this backdrop, indicating cooperation to implement the reforms.
