The German Bundesrat has approved a comprehensive tax relief package. Under the so-called Tax Amendment Act, the commuter allowance will increase, the value-added tax on restaurant meals will decrease, and the volunteer allowance will be raised. Although the states had initially resisted due to anticipated revenue shortfalls, they gave their final approval on Friday.
The measure to reduce VAT on meals had already faced significant criticism in the Bundestag. The Left Party and the Greens called it an economically ill-advised tax gift. Starting January 1, 2026, the VAT for meals in restaurants, but not for drinks, will permanently drop from 19% to 7%. Introduced at the initiative of the CSU and included in the coalition agreement, the government says the measure is intended to stabilize the hospitality sector.
Lower prices in restaurants, however, are not guaranteed. “Both passing the tax reduction on to consumers and additional investments are possible,” the legislative proposal states. Restaurant operators are not obliged to transfer the reduction to their guests. Industry associations have announced that any additional revenue is unlikely to be used for price reductions, but at most to prevent further price increases.
The commuter allowance will rise to a uniform 38 cents per kilometer from the beginning of the year. Previously, the allowance was 30 cents per kilometer for the first 20 kilometers and 38 cents from the 21st kilometer onward. The tiered system will be eliminated. The government says the change ensures equal treatment for all taxpayers, regardless of travel distance.
The Tax Amendment Act also increases the volunteer allowance from 840 to 960 euros and the instructor allowance from 3,000 to 3,300 euros per year, enabling clubs to provide higher compensation without recipients owing taxes. Additionally, the law doubles the maximum tax-deductible amounts for political donations. Union members can deduct their contributions, in addition to existing expense allowances, from taxable income. Prizes for Olympic medal wins will also be tax-free under the new rules.
The law will result in revenue shortfalls for states and municipalities, for which the states requested compensation from the federal government. The government has rejected providing compensation for these tax losses.
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