Germany: Draft Annual Tax Act 2026; other VAT developments
Draft Annual Tax Act 2026 introduces a shift in how VAT groups are established in Germany
July 14, 2026
The German Ministry of Finance (BMF) published the draft Annual Tax Act 2026, which introduces a shift in how VAT groups (Organschaft) are established in Germany. While other VAT amendments are proposed to take effect on January 1, 2027, the new VAT grouping rules are scheduled to apply for the first time on January 1, 2029, following a transitional period through December 31, 2028:
- Declaration requirement (New Section 2c UStG): Currently, a VAT group arises automatically once integration requirements are met. Under the draft, a VAT group will only exist after an explicit declaration is submitted.
- Substantive rules remain unchanged: The core integration requirements—specifically financial, economic, and organizational integration—must still be fully met to qualify.
- Protection against retroactive unwinding: If a VAT group is later found to have lacked the integration requirements, a retroactive unwinding can be avoided, provided that the mistake did not result in tax revenue losses.
Read a June 2026 report prepared by the KPMG member firm in Germany
Other recent VAT developments that may affect businesses in Germany include:
- VAT exemption for supplies rendered by a VAT group
- Correction of VAT incorrectly charged on invoices following a tax audit
- Administration of loans following a transfer—VAT exemption for loan administration services
- VAT treatment of supplies made via an app store
- Granting of admission rights
- VAT exemption for a supply within a chain transaction—evidentiary requirements