VAT rate reduction for the gastronomy industry

A letter from the Federal Ministry of Finance dated 22 December 2025 (Ref.: III C 2 - S 7220/00023/014/027) regulates some aspects of the practical implementation of the VAT rate reduction. We summarise what needs to be taken into account here:

• Cash registers in gastronomy establishments must be programmed in good time so that the new VAT rate is applied from 1 January 2026.
• Although this VAT rate reduction only applies to food, it should be noted that not all beverages are automatically subject to the standard tax rate of 19%. Beverages such as milk, water, soft drinks, coffee, etc. remain at 19%; milk-based beverages with a milk content of at least 75% continue to be taxed at 7% (see annex 2 to section 12 UStG).
• In the case of combination offers such as buffets or all-inclusive deals, according to the BMF letter dated 22 December 2025, it is not objectionable if the beverage portion is set at a flat rate of 30% of the total price.
• Something that is less common in restaurants but more common among caterers is advance payments. In this case, the VAT is incurred when the payment is received at the VAT rate applicable at that time. If a different VAT rate applies at the time the service is provided, it must be corrected. The BMF letter dated 22 December 2025 does not provide for any simplification rules; it remains to be seen whether the simplification rules in accordance with the BMF letter dated 30 June 2020 on the temporary reduction of the standard and reduced VAT rates as of 1 July 2020 will apply again.
• Restaurant and catering sales on New Year's Eve 2025/2026 may be difficult to assess in terms of the time of performance. While, according to the BMF letter dated 30 June 2020, the reduced VAT rates could already be applied to sales on the night of 30 June 2020 to 1 July 2020, the BMF letter dated 22 December 2025 merely stipulates that no objection will be raised if the old VAT rate (19%) is still applied to services provided on the night of 31 December 2025 to 1 January 2026.
• Particular attention should be paid to restaurant vouchers that were purchased before 1 January 2026 but will only be redeemed after that date: if these are single-purpose vouchers that are taxed immediately, the VAT rate valid in 2025 will continue to apply. In the case of multi-purpose vouchers, the VAT will only be payable when the voucher is redeemed at the VAT rate valid at that time.

Author: Nadia Schulte