Germany VAT 2026 Explained: Rates, Calculations and the Kleinunternehmer Exemption
Germany levies VAT (Umsatzsteuer) at three rates in 2026: the standard rate of 19 % on most goods and services, a reduced rate of 7 % on food, books, newspapers, local transport and — permanently from 1 January 2026 — restaurant meals (food only, not beverages), and a zero rate for qualifying solar PV installations up to 30 kWp. Small businesses with prior-year turnover not exceeding €25,000 may be exempt from charging VAT under the Kleinunternehmer rule. Consult a tax adviser for your specific situation.
The three VAT rates in 2026
The German VAT system (Umsatzsteuergesetz, UStG) applies three rates in 2026. The standard rate (Regelsteuersatz) of 19 % under §12 Abs. 1 UStG applies to the majority of supplies of goods and services. The reduced rate (ermäßigter Steuersatz) of 7 % under §12 Abs. 2 UStG and Schedule 2 (Anlage 2) applies to basic food, books, newspapers and magazines, cultural events and local public transport. The zero rate (Nullsteuersatz) of 0 % under §12 Abs. 3 UStG applies to the supply and installation of solar PV systems with a capacity of up to 30 kWp on residential buildings, garages and buildings used predominantly for the public good.
2026 change: restaurant meals permanently at 7 %
From 1 January 2026 the reduced rate of 7 % applies permanently to restaurant meals (Verpflegungsdienstleistungen), as established by the BMF administrative letter of 22 December 2025 amending the UStAE (Umsatzsteuer-Anwendungserlass). This ends years of temporary measures and tax changes in the restaurant sector. Beverages — whether alcoholic or non-alcoholic — remain subject to the 19 % standard rate. When food and beverages appear on the same bill, they must be listed on separate lines so that each rate is applied correctly.
Net and gross: the VAT formulas
Adding VAT (net to gross): gross = net x (1 + rate); VAT amount = net x rate. Extracting VAT from a gross price (gross to net): net = gross / (1 + rate); VAT amount = gross x rate / (1 + rate). Quick reference: at 19 % the VAT contained in a gross price equals 19/119, approximately 15.97 % of the gross. At 7 % it equals 7/107, approximately 6.54 % of the gross. These fractions appear on every German VAT return and are useful for checking supplier invoices.
Kleinunternehmer exemption: opting out of VAT
Under §19 UStG, businesses whose turnover in the preceding calendar year did not exceed €25,000 and who do not expect to exceed €100,000 in the current year may apply the Kleinunternehmer rule. They do not charge VAT on outgoing invoices and cannot reclaim input tax (Vorsteuer). These thresholds have applied since 2025, replacing the former €22,000 and €50,000 limits. A business may voluntarily waive the exemption, but is then bound by ordinary VAT rules for five years. If turnover exceeds €100,000 in the current year, the exemption ends immediately.
Input tax deduction and cross-border supplies
VAT-registered businesses may deduct the VAT charged to them by other businesses (Vorsteuer) from their own VAT liability, ensuring that the tax is effectively borne only by the final consumer. Intra-EU supplies and exports to third countries may be zero-rated with the right to deduct input tax, but only if specific documentary and substantive conditions are met. These cross-border rules are complex; professional advice is essential when trading with customers or suppliers outside Germany.
FAQ
What is the VAT rate in Germany in 2026?
The standard rate (Regelsteuersatz) is 19 % under §12 Abs. 1 UStG. The reduced rate (ermäßigter Steuersatz) is 7 % and covers food, books, newspapers, local public transport and restaurant meals (food only) from 2026. A zero rate applies under §12 Abs. 3 UStG to qualifying solar PV installations of up to 30 kWp.
How do I extract VAT from a gross (VAT-inclusive) price?
At 19 %: VAT = gross x 19/119 (approximately 15.97 % of the gross). Net price = gross / 1.19. At 7 %: VAT = gross x 7/107 (approximately 6.54 % of the gross). Net price = gross / 1.07.
Does the 7 % rate apply to drinks in a restaurant from 2026?
No. The 7 % reduced rate applies only to food (Verpflegungsdienstleistungen); all beverages — alcoholic and non-alcoholic alike — remain taxed at 19 %. Mixed bills must show food and drinks on separate lines to apply the correct rate to each.
When must I register for VAT in Germany?
In principle, as soon as you carry on a business activity. The Kleinunternehmer exemption (§19 UStG) may defer or avoid registration if prior-year turnover was at most €25,000 and current-year turnover is not expected to exceed €100,000. If the €100,000 current-year limit is breached, standard VAT rules apply immediately from that point in the year.
⚠️ Informational estimate, not tax advice. Payroll software may differ in edge cases. Verify with a professional.