Germany has passed a wide-ranging tax relief package that includes a slashing of the sales tax rate for restaurants. The tax reform bill, was approved Thursday by the Bundestag, Germany’s lower house.
However, the tax break still requires consent from the Bundesrat, Germany’s upper house. That assembly represents Germany’s 16 states, which have so far withheld their approval because of expected revenue losses.
The lower rate for restaurants drew sharp criticism in the debate. Lawmakers from the Greens and the socialist Left Party called it an economically unsound giveaway. The bill passed with support from the governing coalition of the conservative CDU/CSU bloc and the center-left Social Democrats, while the Greens and far-right Alternative for Germany voted against. The Left abstained.
The law can take effect only if the Bundesrat approves it on December 19. The states want compensation for lost revenue, estimated in the draft at more than two billion euros next year alone. The federal government has rejected such compensation so far.
Under the bill, VAT on restaurant food would fall permanently from 19% to 7% starting 1 January 2026. The measure, pushed by the CSU during coalition talks, is intended to stabilize the struggling hospitality sector. Restaurants would not be required to pass the tax cut on to customers.
The bill also includes higher tax allowances for both commuters and volunteers.
