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Germany's Planned VAT Cut for Restaurants Faces Uncertainty Over Consumer Impact

Despite the proposed reduction in VAT from 19% to 7% starting January 2026, rising costs leave doubts about whether diners will see lower prices.

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Derzeit gelten noch 19 Prozent Mehrwertsteuer im Restaurant
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Overview

  • The coalition government has proposed permanently reducing VAT on restaurant meals to 7% from January 1, 2026, pending parliamentary approval.
  • Dehoga, the German hospitality association, warns that the tax cut may not lead to lower menu prices due to surging labor and material costs.
  • Labor costs in the hospitality sector increased by 34.4% between Q1 2022 and Q4 2024, while food prices rose by nearly 28% as of March 2025.
  • A recent Dehoga survey found that nearly 40% of restaurant operators fear financial losses in 2025, highlighting the sector's vulnerability.
  • The tax reduction is welcomed as potential relief for the struggling industry, but operators remain cautious about its impact on their ability to retain staff and stabilize operations.