Published on November 17, 2023, 3:30 am

Germany Set To Increase Vat Rate For Gastronomy Sector From 7% To 19%

Germany to Raise VAT Rate for Gastronomy Sector from 7% to 19%

Germany is preparing to raise the value-added tax (VAT) rate for meals at restaurants and cafes from the current temporary rate of 7% to 19% starting in January 2024. Initially introduced in 2020 by the former CDU-led government as a measure to alleviate financial burdens on the gastronomy sector during the COVID-19 crisis, this reduction has been extended multiple times due to the ongoing energy crisis. However, it is set to expire at the end of this year.

Advocacy for Continued VAT Reduction

There has been significant advocacy within the industry urging authorities to maintain the reduced VAT rate. The FDP party, in particular, has been outspoken about extending the lower taxes for an additional year. FDP General Secretary Bijan Djir-Sarai has emphasized the ongoing challenges faced by the sector, even as it navigates through life after the pandemic.

Coalition Partners Take a Step Back

Despite these pleas, coalition partners such as the SPD and Green Party have distanced themselves from further extending the VAT reduction. This change in stance comes amid concerted efforts towards budget consolidation. The decision was made during budget talks held on a recent Thursday evening. The final verdict on this matter will be announced later in discussions over the coalition’s draft budget, which is scheduled for review in the German parliament this week.

Contrasting International Perspective

While Germany moves toward increasing its VAT rate, there are contrasting opinions elsewhere. Paul Lenehan, president of Ireland’s Restaurant Association (RAI), has challenged his own government’s assertion that their hospitality sector has fully recovered. Lenehan criticized Ireland’s decision to revert the VAT rate for their sector back to 13.5% and instead urged them to reinstate a lower VAT rate of 9% specifically for hospitality businesses.

Conclusion

As Germany prepares for a potential VAT rate hike for the gastronomy sector, the decision lies in the hands of policymakers during discussions over the coalition’s draft budget. While the industry continues to advocate for a continued reduction in taxes, it remains to be seen whether Germany will choose to maintain or increase the VAT rate. Similarly, other countries like Ireland are also grappling with decisions on VAT rates for their own hospitality sectors. The outcome of these deliberations will undoubtedly shape the future of these industries and have far-reaching implications for businesses and consumers alike.

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