With annual consumption at around 167 litres per capita, coffee is by far the most popular hot drink in Germany. This benefits the manufacturers, and also the German state. This is because coffee tax is levied on every gram of coffee sold. Restaurants, cafés and other businesses that buy and sell coffee need to be well informed about the applicable tax obligations. In this article, you will find out what coffee tax is, which products it applies to and who has to pay it. We will also explain how much is charged for coffee tax, value-added tax (VAT) and customs duty on various coffee products.

What's in this article?

• What is coffee tax?
  
• Which products are subject to coffee tax?
  
• Who needs to pay coffee tax?
  
• What tax rate is applied to coffee?
  
• How much VAT is charged on coffee?
  
• How much duty is charged on coffee?
  

What is coffee tax?

Like alcohol, beer or tobacco tax, coffee tax is a consumption tax. This makes it an indirect tax, as it is not the customers but the manufacturers and businesses who must pay coffee tax. Consumption taxes are levied on goods that are consumed or used while in the economic system in the Federal Republic of Germany. The only exceptions are the Büsingen area, the island of Helgoland and the German free ports, where special provisions apply. The coffee tax is levied and administered by the German customs administration (Section 108(1) under German Basic Law, or GG), and the proceeds are paid to the German treasury (Section 106(1) of the GG). The annual tax revenue generated by the coffee tax exceeds €1 billion as of 2022.

Germany is one of the few European countries to levy a coffee tax, along with Belgium, Croatia, Denmark, Latvia and Greece. The history of this tax dates back a long way. As early as the 18th century, the increasing consumption of coffee in Prussia led to the introduction of an import duty on coffee. From 1871, the revenue went to the German Reich. After the Second World War, the coffee tax was introduced in its current form as an excise tax by the occupying powers and enshrined in the German Basic Law in 1949. The legal basis for the coffee tax is set out in the German Coffee Tax Act (KaffeeStG) and the German Coffee Tax Ordinance (KaffeeStV).

Which products are subject to coffee tax?

In Germany, coffee tax is levied on roasted coffee, instant coffee and other goods containing coffee. Raw coffee (i.e. coffee beans that have not yet been processed) is exempt from the tax.

Roasted coffee is coffee that has been through a roasting process, which may also be decaffeinated (Section 1(3) of the KaffeeStG). This is produced by roasting the coffee beans for a short time at high temperatures in a hot air roaster, or for a longer time at lower temperatures in a drum roaster. It is only through the roasting process that raw coffee gains its aroma and dark colour. Roasted coffee is available to buy as coffee beans or ground.

Instant coffee, also known as soluble coffee or coffee extract, refers to extracts, essences and concentrates of coffee – which may also be decaffeinated (Section 1(4) of the KaffeeStG). The quantity is determined by the mass of the dry product. Instant coffee is produced from roasted coffee, which is ground and then brewed with water. The highly concentrated extract created by this process is then dried. Instant coffee is primarily sold in the form of a powder or granules. To drink it, all you need to do is mix it with hot water. If it is impossible to determine beyond doubt whether the product is roasted coffee or instant coffee, it will be classified as instant coffee.

Goods classified as containing coffee are products that contain 10 to 900 grams of coffee per kilogram (Section 1(5) of the KaffeeStG). If there is less than 10 grams, coffee tax does not apply, as the goods are no longer classified as containing coffee. If the coffee content is over 900 grams per kilogram, the product is considered to be coffee. Classic goods containing coffee include cappuccinos, iced coffee and lattes. Unlike roasted coffee and instant coffee, goods containing coffee are only subject to coffee tax if they are imported into Germany from third countries. The reason for this is to ensure the same tax rate as for goods containing coffee produced in Germany, as these are made from coffee that has already been taxed.

It is important to note that coffee tax becomes payable for pure coffee even if just one gram of coffee has been sold. There is no lower limit for small quantities.

Who needs to pay coffee tax?

Coffee tax must be paid by all businesses that produce coffee or products containing coffee, or that import them into Germany from third countries and sell them within the tax territory. This includes coffee roasters, importers, wholesalers and retailers. Businesses usually pass on their tax burden to customers, as coffee tax is usually included in the sale price.

However, imports of coffee from other EU member countries – including through online retailers – are exempt from coffee tax if the goods are sold directly to end customers for personal consumption. If you buy coffee abroad, you can import up to 10 kilograms into Germany without paying additional tax – provided the goods were purchased for personal use.

Exports of coffee are generally not subject to coffee tax.

What tax rate is applied to coffee?

The tax rate for coffee in Germany depends on whether it is roasted coffee or instant coffee (Section 2(1) of the KaffeeStG).

Tax rate for roasted coffee and instant coffee

Specific provisions apply to goods containing coffee. The coffee tax rate depends on the type and quantity of coffee content.

Tax rates for goods containing roasted coffee

Tax rates for goods containing instant coffee

How much VAT is charged on coffee?

Independent of coffee tax, VAT also applies to coffee and goods containing coffee. The VAT rate is based on the milk content of the coffee product. If the milk content of freshly prepared coffee drinks is below 75%, the standard tax rate of 19% applies. For example, this is the case for black coffee or coffee with very little milk. For cappuccinos, latte macchiatos or other coffee drinks with a milk content of over 75%, the VAT rate is 7% (Appendix 2 (35) to Section 12 (2) of the German VAT Act, or UStG).

How much duty is charged on coffee?

To protect domestic industry, there are import duties for coffee in Germany. Only imports of unprocessed raw coffee from third countries are duty-free. The following provisions also apply.

Import duties for coffee products

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