Federal Council has approved the Tax Amendment Act 2025, introducing individual tax relief, permanent VAT cuts for restaurants, and updates for nonprofits and administrative procedures.
The Federal Council (Bundesrat) approved the Tax Amendment Act 2025 (Steueränderungsgesetz 2025) on 19 December 2025, providing tax relief measures for individuals and other technical amendments to various tax laws.
Income tax:
- Increase in commuter allowance (distance lump sum) to 38 cents per kilometre from the first kilometre.
- Removal of the time limitation on the mobility premium to extend benefits for low-income taxpayers beyond 2026.
- Increased tax exemption thresholds for voluntary charitable work:
- The trainer/leader allowance has been raised to EUR 3,300/year.
- The volunteer allowance has been increased to EUR 960/year.
- Clarifications on tax exemptions for activities by entities under public law and EU/EEA/Swiss jurisdictions.
- Updates to references regarding the EU “de minimis” state aid rules for investment incentives and research allowances.
VAT:
- Permanent reduction of VAT on restaurant and catering services (excluding beverages) to 7%, effective from 1 January 2026, to support the gastronomy sector and avoid distortions due to differing rates on food delivery and restaurant consumption.
- Introduction of a new § 21b UStG for special rules on centralised customs procedures under EU customs law (Article 179 of the Union Customs Code), ensuring proper VAT treatment on goods imported and declared through customs authorities in other EU member states.
Non-profit law:
- Increase of annual revenue thresholds for tax liability of economic activities of non-profit entities from EUR 45,000 to EUR 50,000, reducing administrative burdens.
- Removal of reporting requirements for the timely use of funds for organisations with an income of up to EUR 100,000 per year.
- Introduction of eSports as a new recognised nonprofit purpose.
- Clarification that photovoltaic installations operated by nonprofits are considered tax-neutral activities if not the primary purpose.
- Simplifications for assigning income from mixed economic activities if below threshold amounts.
Administrative and legal simplifications:
- Electronic notification of tax decisions regarding non-forwarding of input VAT refund requests to become the default, removing the current consent requirement.
- Abolition of the need for manual consent for data retrieval notification of administrative acts from 2026.
- Various technical updates related to EU state aid rules “de minimis” and technical harmonisation.
The law will take effect after its publication in the Official Gazette.
Earlier, Germany’s lower house of the parliament (Bundestag) approved the draft Tax Amendment Act 2025 on 4 December 2025.
