As of January 1, 2026, the German government lowered the value-added tax (VAT) on food served in restaurants from 19 percent to 7 percent. This policy, part of the 2025 Tax Amendment Act, was intended to provide financial relief to both consumers and the struggling hospitality sector. However, many diners have noticed that the cost of a restaurant meal, such as a classic schnitzel, has not decreased as expected. For the average guest, this creates a disconnect between government policy and their personal experience at the checkout counter.
The primary reason for this trend is that the tax reduction is only one factor in a complex cost structure. While the lower VAT rate reduces the tax burden on food, restaurants are simultaneously grappling with significant increases in other operational expenses. Labor costs, energy prices, and the cost of raw ingredients have risen sharply over the past two years. Many business owners argue that these mounting overheads have essentially absorbed the savings generated by the tax cut.
For many restaurateurs, the decision to maintain current prices is a matter of survival rather than a choice to boost profits. With profit margins often razor-thin, the tax relief serves as a buffer against potential insolvency rather than a surplus that can be passed on to customers. Industry representatives, including the German Hotel and Restaurant Association (DEHOGA), emphasize that businesses are free to set their own prices based on their specific financial realities.
Looking ahead, the public may continue to see high menu prices despite the tax adjustment. While the policy successfully simplifies the tax system by creating a uniform 7 percent rate for both dine-in and takeaway food, it does not guarantee lower prices for the consumer. Whether prices eventually stabilize or decrease will depend on broader economic factors, including inflation trends and the ability of the hospitality industry to manage its rising fixed costs.