VAT Changes for Hotel and Restaurant Services in Germany in 2024

Effective January 1, 2024, the VAT rate for restaurant and catering services in Germany will revert to 19%. This change ends the temporary reduction to 7% that was implemented during the COVID-19 pandemic to support the hospitality sector. The increase to 19% will apply to all food services in restaurants and catering, but the supply of beverages has consistently remained at 19% and will continue to do so.

Impact on B2B Transactions

1. Increased Costs for Business Travel: The higher VAT rate will lead to increased costs for companies that frequently engage in business travel and require hotel accommodations and dining services. Businesses will need to budget for these increased costs in their travel and hospitality expenses.
2. VAT Reclamation: For VAT-registered businesses, the higher rate of 19% means that while they can still reclaim VAT on these expenses, the absolute value reclaimed will increase. This may affect cash flow management and necessitates accurate bookkeeping and timely VAT reclaim submissions to avoid financial strain.
3. Adjustments in Expense Reporting: Companies will need to update their internal systems for expense reporting to reflect the new VAT rate. Employees responsible for handling travel and entertainment expenses must be aware of these changes to ensure compliance and accuracy in financial records.
4. Strategic Planning: Businesses may need to explore cost-saving measures or renegotiate terms with service providers to manage the increased VAT expenses effectively. This might include seeking bulk booking discounts, choosing alternative service providers, or adjusting the frequency of business travel.

Conclusion

The reversion to a 19% VAT rate on restaurant and catering services represents a significant change that will impact B2B transactions in Germany. Businesses must prepare by updating their financial systems and planning for increased costs in their budgets. Ensuring compliance with VAT reclaim processes will be crucial to manage the financial impact effectively.

At WW+KN, a Baker Tilly Company, we are here to help you navigate these changes. For assistance and more information, feel free to reach out to us at info@vat-germany.com.