Germany Implements VAT Reforms Effective January 2026

Permanent VAT Rates: Effective January 1, 2026, Germany sets restaurant food at a permanent 7% VAT, drinks at 19%, and raises the nonprofit commercial exemption threshold to €50,000, providing stability for hospitality and charitable sectors.
Sector Benefits: Restaurants gain pricing and investment certainty, while nonprofits and charities have increased flexibility to generate income from commercial activities without jeopardizing tax exemptions, supporting economic activity and long-term planning.
Compliance Considerations: Businesses must address challenges including accurate food versus drink classification, system upgrades, staff training, and careful income tracking for nonprofits to ensure ongoing compliance under the new VAT rules.