Germany: VAT on food in restaurants rises again

Germany | Despite calls for a lower VAT rate on food in the catering industry to prevent further insolvencies, the coalition government, on 17 November, agreed that, as of January 2024, VAT will be hiked to 19 percent again, from currently 7 percent.

In order to ease the burden on the catering industry during the covid pandemic, the tax rate for food in restaurants and cafés was temporarily reduced. The regulation was extended several times, most recently due to the energy crisis, until the end of this year. The measure had cost Germany’s cash-strapped government some EUR 3.4 billion (USD 3.7 billion) in taxes each year.

Price increases despite VAT subsidy

But even with the lower VAT rate, prices in restaurants, cafés and bars have risen significantly over in the past two years. According to figures by the Federal Statistical Office, in October, restaurant services cost 20 percent more than in January 2021. Compared to February 2022, when the war in Ukraine began, the increase is 14 percent.

The catering industry campaigned loudly in favour of maintaining the lower VAT rate. It pointed out that the pandemic had already forced thousands of venues out of business. There were 138,000 catering venues in 2021, down from 165,000 in 2019.