Value-added tax (VAT) regulations in the German restaurant industry have been the subject of much heated discussion, especially since COVID. Following a temporary reduction and a brief return to the regular tax rate, new regulations have been in effect since the beginning of 2026. . This article will tell you where things stand currently and what legal regulations apply to restaurants in Germany. We’ll also shed light on specific challenges involved for both restaurants and online food and beverage retailers when it comes to VAT. Plus, we’ll give you a quick overview of the legal and financial consequences of VAT errors.

What’s in this article?

• VAT in the restaurant industry: What the law says
  
• Past and planned changes to VAT in the restaurant industry
  
• Practical challenges for businesses
  
• What are the consequences of VAT errors in the restaurant industry?
  

VAT in the restaurant industry: What the law says

VAT is a consumption tax on the sale of goods and services. Restaurants add VAT to the price of food and beverages and then remit that VAT to the tax office. So ultimately, it’s the consumers who bear this tax, not the businesses.

The key statutory provisions concerning VAT are laid down in the German VAT Act (UStG). Taxable sales in Germany are subject to a standard tax rate of 19% pursuant to Section 12.1 of the UStG. However, certain goods and services are subject to a reduced tax rate of 7% (see Section 12.2 of the UStG). This rate applies to everyday goods and services that the law classifies as essentials. In the German restaurant industry, there are numerous regulations concerning VAT on food. These regulations vary depending on the type of service and business.

Food and beverage service types

For prepared food, the law differentiates firstly between consumption on the premises and consumption off the premises. At restaurants, diners, or bars, where food and beverages are generally consumed on the premises, the standard tax rate of 19% applies. Snack bars or food trucks, on the other hand, generally apply the reduced rate of 7%.

The deciding factor is whether or not the establishment offers other services in addition to food, such as table seating, place settings, and service by wait staff. If the establishment does offer these kinds of services, then it’s considered a restaurant or catering service, which is subject to the standard tax rate of 19%.

Another key criterion is type of tableware: If a sausage stand uses disposable tableware, for example, then it can charge 7% VAT on the food. But if guests are served their currywurst on a porcelain plate, then the standard tax rate of 19% applies. That’s because porcelain tableware has to be washed after use, rather than thrown away. This additional service is regarded as part of the restaurant or catering service, and therefore incurs the higher tax rate.

This VAT rule on consumption on-premises versus off-premesis does not apply to beverages.

Essential food products

The second key criterion in determining which VAT rate to apply to food and beverage items is whether or not they’re considered essential products. Food and beverages that are regarded as everyday essentials (i.e., staples) are generally taxed at the lower rate. This includes, for example, bread, fruit and vegetables, fish, meat, milk, and water. That said, there are a lot of exceptions to this supposedly blanket rule. Still water, for example, is considered an essential item, while sparkling or carbonated water is not, and so is taxed at 19%, rather than 7%. VAT on beverages can prove particularly challenging for restaurant owners on account of the many specific regulations.

Generally speaking, however, luxury products are taxed at the standard tax rate, since they’re not considered staples. These include foods like caviar, lobster, or expensive cuts of meat, as well as alcoholic beverages.

Restaurants tend to sell prepared food and beverages rather than unprocessed foodstuffs. When it comes to applying VAT to these items, what matters is how much of each foodstuff they contain. A black coffee, for example, is taxed at the standard tax rate of 19% because it is not an essential item. A cappuccino, on the other hand, is usually taxed at 7% because it has milk content of more than 75%, and milk is considered a staple.

Past and planned changes to VAT in the restaurant industry

VAT has a long history in Germany. A tax on the supply of goods was being levied as early as 1916, at the height of World War I. The German Empire introduced the first general tax on sales of goods and services in 1918. This was followed a year later by a multiperiod gross sales tax that remained in place for almost 50 years. In 1968, the sales tax system was transitioned to VAT—initially at a standard rate of 10% and a reduced rate of 5%. Lawmakers raised tax rates multiple times over the following decades, introducing in 2007 a standard tax rate of 19%, which applies to the restaurant industry.

In response to COVID, the German government reduced the VAT rate on prepared food in restaurants, cafés, and similar establishments to 7% from July 2020 to December 2023. The aim of this temporary measure was to support the restaurant industry, which was taking particularly heavy losses in revenue. From January 2024 to December 2025, the regular tax rate of 19% applied again.

In their 2025 Coalition Agreementthe Christian Democratic Union (CDU), Christian Social Union (CSU), and the Social Democratic Party (SPD) agreed to permanently reduce VAT on restaurant food to 7%. Since January 1, 2026, the legal change has been in effect – however, it does not apply to beverages. This measure is intended to ease the strain on the German restaurant industry overall, rather than just managing the immediate crisis.

Practical challenges for businesses

Businesses in hospitality—and in particular the restaurant industry—face significant challenges on account of the many detailed legal regulations that apply to their sectors. The same is true of online retailers that sell food, beverages, or prepared meals. Here are a few concrete examples.

Mixed-VAT orders

Businesses in the food and beverage industry must take into account the different tax rates when billing customers. As soon as more than one item is ordered, there’s a good chance that one part of the order will be taxed at 19% and another part at 7%. A main course, for example, will be taxed at the standard tax rate, while a glass of still water will be taxed at the reduced rate.

The same applies to ecommerce businesses. Online retailers that sell other products alongside food have to indicate the correct VAT rate on those products as well.

Food and beverage delivery

Delivery and in-store or curbside pickup of food and beverages are considered off-premises sales. Since the items are not consumed at a restaurant or equivalent establishment, no additional service is provided. In these cases, therefore, the reduced tax rate of 7% applies. The only exemption is luxury products, which are taxed at 19%.

Catering

Catering businesses also face the difficult task of working out which tax rates to apply. The key here is determining whether additional services are provided, or just delivery. If they are simply delivering food and beverages, then the reduced rate applies—provided the goods are considered essential food items. But as soon as additional services are provided, the entire catering service is considered a restaurant and dining service, which is subject to the standard tax rate of 19%. Examples of such services include serving guests or providing tables, dishes, or cutlery.

Calculating VAT correctly

In all of the cases we’ve mentioned, accurate VAT calculation is key to correct billing. Many restaurant owners use spreadsheets to keep track of whether 7% or 19% VAT applies to specific products. But this manual approach is time-consuming and increases the likelihood of errors.

Automated solutions can help ensure you apply the correct tax rates. Stripe Tax calculates VAT rates based on a variety of factors, such as product category, buyer location, and order type (i.e., whether it's for on-site consumption or delivery)—saving you time and ensuring you’re compliant with the legal regulations, even when laws change. Plus, with the Stripe VAT calculator, you can determine tax rates in numerous countries worldwide. Stripe Payments then ensures that your customers are shown the final prices clearly and transparently.

What are the consequences of VAT errors in the restaurant industry?

Applying VAT incorrectly in the restaurant industry can have significant legal and financial consequences. Restaurants that apply the wrong tax rates risk being subject to back tax assessments from the tax authorities. These typically include both the payment of unpaid taxes and penalty interest for late payments. You might even find yourself subject to a special VAT audit if your accounts show irregularities. In the worst-case scenario, tax authorities can issue fines or launch criminal proceedings if they think you’re intentionally avoiding tax or they consider you a repeat offender.