Germany to Cut Restaurant VAT to 7% From 2026 as Draft Leaves Price Cuts Optional

Overview

• A finance ministry draft sets a permanent 7% VAT rate on dine‑in meals starting 1 January 2026, restoring the pandemic-era concession.
• The draft explicitly allows restaurants to keep the savings or reinvest them rather than lower menu prices, undercutting earlier political assurances of cheaper bills.
• The ministry estimates tax shortfalls of about €3.6 billion in 2026 and more than €19 billion through 2030.
• Industry group Dehoga says broad price reductions are uncertain given higher labor and food costs, while welcoming tax parity with takeaway.
• States share in the revenue losses, raising the prospect of renewed Bund‑Länder budget friction over compensation.