Current legislative initiatives relating to VAT

Tax Amendment Act 2025

The draft bill complies with the demands of the gastronomy industry and permanently reduces the VAT rate for restaurant and catering services (with the exception of beverages) to 7% in § 12 (15) of the VAT Act. This is in line with the coalition agreement. We have explained what needs to be taken into account here in our client information on the coalition agreement.

In addition, according to an amended § 18g (5) of the VAT Act, notices of non-forwarding of applications in the input VAT refund procedure will only be sent in paper form by the Federal Central Tax Office if this is necessary to avoid undue hardship. Under the previous regulation, the notice had to be sent in paper form if the applicant had not consented to the notice being made available for electronic data retrieval.

The third amendment concerns cross-EU-Member State centralised customs clearance in accordance with Article 179 UCC (Customs Code of the European Union). This regulation makes it possible to present the goods for import in Germany but, under certain conditions, to submit the customs declaration in another EU Member State. The newly inserted § 21b of the VAT Act stipulates that in this case, the customs debt, and thus also the import VAT debt, arises not at the place of declaration but at the place of presentation in Germany.

The three regulations are scheduled to come into force on 1 January 2026.

Act on the Modernisation and Digitalisation of the fight against undeclared labour

The government draft provides for an amendment to § 15 (4) of the VAT Act on the allocation of input VAT for mixed-use properties: the ratio of usable floor space is to be used as the primary basis for allocation, unless another method leads to a more precise economic allocation.

§ 15 (4) sentence 3 of the VAT Act had only been amended with the Annual Tax Act 2024. This was intended to take into account the ECJ jurisdiction and the letter of the Federal Ministry of Finance of 13 February 2024. However, the new regulation was interpreted in some cases to mean that only the total turnover key was subordinate, so that the taxable person was free to choose between the area key and the property-related turnover key. This new regulation is intended to clarify that, in the case of mixed-use properties, the input VAT allocation is to be made primarily according to the ratio of usable floor space.

This change will come into force on the day after the law is promulgated.

Author: Nadia Schulte