Increased Frustration amid Rising Prices: Schnitzel Fails to Decrease in Cost
Starting January 1, 2026, the value-added tax (VAT) on restaurant meals in Germany is set to decrease from 19% to 7%, potentially leading to lower prices for consumers dining out. This move aims to ease the cost burden on the hospitality sector and make eating at restaurants more affordable.
Currently, food consumed on-site in restaurants is subject to the standard 19% VAT rate, while takeaway food benefits from a reduced 7% rate. The government's proposal to reduce the VAT rate on restaurant meals would align on-site dining VAT with takeaway, which should decrease the VAT component of menu prices.
However, the actual impact on consumer prices depends on how much of the tax cut restaurants pass on to customers versus how much they retain to improve margins. The plan faces criticism over its fiscal impact and industry favoritism, with an estimated revenue loss of about 14.54 billion euros from 2026 to 2029.
In contrast, recent legislation raised the general VAT rate from 19% to 21% in August 2025 and unified reduced rates into a single 11% rate for many goods, including some food products. However, this does not currently apply to restaurant meals. The VAT cut on restaurant dining planned for 2026 thus represents a reversal from the 2024 reinstatement of the 19% standard rate for food consumed on-site.
The planned VAT reduction is significant but not yet in effect, so the exact impacts on food prices will be observable only after implementation and market response. While some consumers may expect price reductions, the economic situation, influenced by the rising minimum wage, is causing businesses to maintain their current prices.
For instance, the popular schnitzel, a highly sought-after dish in Germany, is not expected to decrease in price due to the financial constraints of local businesses. Some entrepreneurs have stated they will not lower prices due to operating at the subsistence level, and the rising minimum wage for employees leaves them with less financial room to maneuver.
As a result, local prices for goods and services are expected to remain unchanged. This means that while the VAT reduction on restaurant meals is a positive step towards making dining out more affordable, consumers may not see immediate price reductions in local establishments.
- In contrast to the proposed VAT reduction on restaurant meals, some businesses may struggle to lower prices due to financial constraints and the rising minimum wage, as seen with the popular schnitzel remaining unchanged.
- Despite the planned VAT reduction on restaurant dining, other goods and services in the local market are expected to remain unaffected, suggesting that consumers may not observe immediate price reductions in all establishments.
