Making the sales tax reduction in the restaurant industry permanent

It was recently decided to refer the bill to make the sales tax reduction for food and services in the restaurant industry permanent to the relevant committees of the Bundestag. As tax advisors in Düsseldorf and Oberhausen, we are here to update you on the current situation.

Background

The rationale behind the proposed permanent reduction is that in neighboring European countries, the sales tax on services and food is significantly lower than in Germany. To make Germany more competitive, VAT rates are now set to be permanently reduced here as well. Until now, restaurant and catering services—with the exception of the sale of beverages—have been taxed at a temporarily reduced VAT rate of seven percent as part of the immediate measures to combat the coronavirus. This reduced rate, introduced to combat the effects of the pandemic and strengthen domestic demand, has been in effect since July 1, 2020, following multiple extensions, and is currently valid through December 31, 2023.

A seven-percent restaurant sales tax forever?

Now, businesses are set to pay lower taxes even beyond this deadline. To this end, the Bundestag laid the groundwork in a resolution dated March 16, 2023, and referred the motion to the relevant committees. The motion is being driven by the CDU/CSU parliamentary group, which has now been approved even beyond the group’s own votes. The 45-member Finance Committee of the Bundestag is leading the effort to enact the further and now permanent reduction to 7 percent. The committee is now deliberating under the chairmanship of the CDU/CSU parliamentary group.

Good prospects for ratification

The proposed permanent reduction in the sales tax would cost taxpayers approximately 3.3 billion euros per year starting in 2024. There are many indications that the permanent reduction will receive a majority in favor in the Finance Committee, despite the dominance of the governing parties—the SPD, Greens, and FDP—which hold a total of 26 seats on the committee. Final approval in the Bundestag and Bundesrat would then be more than likely—restaurants and hotels have reason to celebrate!

Tax Advisors for the Restaurant and Hotel Industries

For companies in the restaurant and hotel industries, our tax consulting firm in Düsseldorf and Oberhausen has an extensive network of experts—both internal and external. Contact us to benefit from our expertise and experience, and schedule an initial consultation at our offices in Düsseldorf or Oberhausen.