Germany’s Draft Annual Tax Act 2026 Proposes Opt‑In VAT Grouping Regime

In Germany draft Annual Tax Act 2026 proposes opt‑in VAT grouping regime, DLA Piper reports that the German Ministry of Finance published a draft Annual Tax Act 2026 in May 2026, whose main VAT measure is a fundamental reform of German VAT grouping (Organschaft). Under current law, a VAT group arises automatically where the financial, economic and organisational integration requirements are met—leading to groups forming or ending unrecognised, with elaborate adjustments. [jdsupra.com]

The proposed new § 2c UStG would add an express declaration to the tax authorities as a further requirement, so that the VAT group generally takes effect only for the future. The draft would also clarify that partnerships may be VAT group members, reflecting ECJ and Federal Fiscal Court case law, and includes specific rules on correction, reversal, interest and liability where a group was incorrectly assumed or applied. The regime is expected to apply from 1 January 2029, with declarations possible from 1 July 2028. [jdsupra.com], [grantthornton.de]

While the reform should reduce the risk of “undetected” VAT groups, businesses must still test whether the substantive integration requirements are met. As the Grant Thornton analysis and Regfollower report note, groups with German entities should map current and potential VAT group relationships, assess whether an opt‑in would be advantageous, and prepare governance for future declarations—reviewing historic positions where earlier conclusions were uncertain. [grantthornton.de], [regfollower.com]