Good news for the German hospitality industry: Starting January 1, 2026, the VAT rate on food will permanently return to 7%. What began as a temporary COVID-relief measure is now becoming a long-term benefit – one that is urgently needed in the sector.
But what does this VAT reduction mean for your restaurant business? And how can you make the most of it from a strategic perspective? This article gives you all the essential insights you need.
The VAT debate in Germany’s hospitality sector has been a bumpy ride with real financial impact for businesses.
In July 2020, the VAT on food served in restaurants was temporarily reduced to 5% to support businesses during the pandemic. In 2021, it shifted to a reduced 7% rate, which was extended several times.
Then came the sharp reversal: At the start of 2024, the full 19% VAT rate returned. This happened right in the middle of rising costs for staff, ingredients and energy, as well as declining guest demand. Consequently, many operators had to recalculate their prices while absorbing much of the cost pressure themselves.
Trade associations such as DEHOGA lobbied hard to keep the lower VAT rate, emphasizing the risk to small and medium-sized businesses and the cultural diversity of the sector. And finally, their efforts paid off. In 2026, the 7% VAT rate for food will return – permanently.
Above all, the return to 7% VAT offers restaurants much-needed financial breathing room. Every meal sold keeps more revenue in-house, which has a noticeable effect on profit margins. This is especially valuable for independent restaurants, smaller operations, and concepts with a high food share.
As well as providing short-term relief, the change creates opportunities for investment, long-term planning and a more sustainable business model. Below, you will find three important topics on which restaurants should focus now.
💰 Rethink your costing: The reduced VAT rate can significantly improve contribution margins. Use this opportunity to review your menu and update your costing calculations to reflect current ingredient prices and demand trends.
📈 Create room for investment: The financial margin gained through lower VAT can be used to upgrade equipment, invest in your team, improve food quality or make sustainable changes. All of these will give you a long-term competitive advantage.
👩🍳👨🍳 Support your team: With higher margins, restaurants can offer better wages, expand training opportunities and improve working conditions. This is more valuable than ever in times of labour shortages.
The VAT reduction has already made headlines, creating expectations. Guests may assume that restaurant prices will drop significantly as a result. But will that actually happen?
In most cases, no. Although the tax rate is falling, operating costs remain high, with significant increases in energy, labour and food expenses. The reduced VAT will enable businesses to maintain their prices, but not reduce them drastically.
During the crisis years, many businesses depleted their reserves and postponed necessary investments. The 2026 relief offers some breathing space, but it is more likely to be invested in better wages, updated systems and stronger teams than passed on through lower prices.
This is why it is important to prepare your team for questions from guests. Be transparent about how the VAT savings are being reinvested, whether in staff development, sustainable practices, or quality improvements. This will build trust and position your business as responsible and forward-thinking.
The return of the 7% VAT rate in 2026 is not just a relief, but also a strategic opportunity. Now is the perfect time to review processes and improve profitability. Digital tools can unlock significant advantages, especially when it comes to costing, inventory and menu management.
If you want to manage prices and the cost of goods more efficiently, now is the time to rethink your approach. With the right digital solution, you can track purchase prices and margins in real time, automatically calculate new dish prices and plan investments based on accurate data.
The VAT change also provides an ideal opportunity to revisit your menu. Use menu engineering strategies to highlight high-margin dishes, remove underperforming items, and restructure pricing. Platforms that include features such as allergen data and CO₂ footprints offer extra flexibility and greater transparency for customers.
Don’t forget about your purchasing and stock management either. By digitally linking recipes, supplier prices and current inventory levels, you can reduce food waste, adjust portion sizes more effectively and respond to price changes more quickly. Say goodbye to manual spreadsheets and hello to actionable data you can trust.
The return to a 7% VAT rate in 2026 represents more than just a policy change. It’s an opportunity to reset and future-proof your operations. For many restaurants, it will finally allow them to breathe again, but only those who prepare now will reap the full benefit.
Digital tools can provide the insights and efficiency you need to stay competitive, whether it’s costing, procurement, or menu strategy. Take this opportunity to streamline your processes, empower your team and transform a tax change into tangible business growth.
The VAT reduction is coming – make sure you’re ready to turn it into an advantage.