Germany: VAT reforms included in coalition agreement; other VAT developments

The German coalition agreement includes plans for the following value added tax (VAT) reforms:

• Permanent VAT reduction for food in restaurants to 7% effective January 1, 2026
• Creation of sectoral exemptions for research
• Conversion of import sales tax to a clearing model to relieve companies of bureaucracy
• Measures to curb VAT fraud
•  Extensive VAT exemption for donations in kind to charitable organizations

Read an April 2025 report prepared by the KPMG member firm in Germany

Other recent value added tax (VAT) developments that may affect businesses in Germany include:

• The Advocate General of the Court of Justice of the European Union (CJEU) on April 10, 2025, issued an opinion in case C‑101/24 regarding the application of VAT to transactions carried out via an app store.
• The Federal Tax Court (BFH) held that membership fees collected by a fitness studio during an officially ordered closure period accompanied by promises of future free months of membership were advance payments subject to VAT (November 13, 2024 decision – XI R 5/23).
• The BFH held that bonus payments in the so-called central settlement business were not subject to VAT (October 23, 2024 decision – XI R 6/22).
• The BFH held that if an insolvent debtor has ceased its entrepreneurial activity, the deduction of input VAT for the insolvency administrator's services must be decided on the basis of the insolvency debtor's previous entrepreneurial activity (October 23, 2024 decision – XI R 8/22). However, the BFH held that if an insolvency administrator continues the business of an insolvent debtor, the input VAT deduction for the insolvency administrator’s services must be allocated based on the proportion of taxable to tax-exempt income generated by the insolvency administrator’s business activities (October 23, 2024 decision – XI R 20/22).