Germany Cabinet Decision: Premature end of reduced VAT on gas from 1.1.2024

• The German Cabinet has decided to end the temporarily reduced VAT on gas earlier than planned, increasing it back to 19% from 1st January 2024.
• The reduced VAT was part of a relief package by the German government in response to the increased energy costs due to the Ukraine war.
• The VAT on gas supplies and heat supply was reduced from 19% to 7% from 1st October 2022 to 31st March 2024.
• The decision to return to the regular VAT rate was made on the proposal of the Federal Finance Minister.
• The SPD party’s concerns about maintaining the reduced tax rate until 31st March 2024 were not accepted.
• The early end of the reduced VAT was justified by the fact that gas prices in 2023 fell more than expected in 2022.
• The decision could mean that gas prices will rise again in the middle of the heating season from 1st January 2024, especially in a cold winter.
• The measure is beneficial for the federal budget, as it would bring about 2.1 billion euros into the budget.
• The return to the old regular tax rate still needs to be formally decided by the Bundestag, but with the votes of the government majority, a deviation from the cabinet decision is unlikely.

Source: nwb-experten-blog.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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