- Permanent VAT Changes: The German VAT Reform, effective January 1, 2026, establishes a permanent reduced VAT rate of 7% for food served in restaurants and catering, while beverages will continue to be taxed at the standard rate of 19%. This reform aims to provide stability for the hospitality sector by solidifying temporary COVID relief measures.
- Increased Allowances for Nonprofits: The reform raises the commercial activity exemption threshold for nonprofits from €45,000 to €50,000 annually and increases the trainer allowance from €3,000 to €3,300, allowing charitable organizations to expand their activities without risking VAT registration while incentivizing community engagement.
- Implementation and Compliance Considerations: Businesses and nonprofits must prepare for these changes by updating their accounting systems, training staff on the new VAT classifications, and reviewing contracts to ensure compliance with the new rules. Early preparation is crucial to capitalize on the benefits of the reform and avoid potential pitfalls in VAT application.
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