19.12.2025Upper house approves Tax Amendment Act 2025
Bill includes mainly tax relief measures for individuals and several other tax technical amendments
Germany’s upper house of parliament on 19 December 2026 approved the Tax Amendment Act 2025 (Steueraenderungsgesetz 2025), which includes mainly tax relief measures for individuals and several other tax technical amendments. The lower house of parliament approved the bill earlier on 4 December 2025, and the bill must now be signed by the president and published in the federal gazette to become effective.
The main content of the bill can be summarized as follows:
- Permanent application of the reduced 7% VAT rate to food supplies in restaurants and bars starting from 1 January 2026 (the reduced VAT rate does not include supplies of beverages); the measure aims to provide economic support to the catering industry and to prevent distortions of competition and (re-)introduce the reduced 7% VAT rate that was already in place for the period 1 July 2020 to 31 December 2023 on a permanent basis;
- Increase of the standardized deduction for commuters to EUR 0.38 per kilometer for travel between home and the place of work and for long-distance commuters for family visits when maintaining two separate households starting from 2026;
- Increase of the tax exemption for part-time activities of trainers and volunteers working for public entities engaged in charitable, benevolent, and ecclesiastical purposes to EUR 3,300 and EUR 960, respectively, starting from 2026;
- Income tax exemption for awards paid by the German Sports Aid Foundation (Stiftung Deutsche Sporthilfe) for the Olympic/Paralympic games;
- Tax deduction for income tax purposes for payments to labor unions (in addition to standard deductions);
- Increased tax deductibility for contributions to political parties;
- Minor amendments for purposes of the R&D tax incentive;
- Increase of the threshold for nontaxable commercial activities carried out by tax-exempt entities that pursue exclusively and directly charitable purposes from EUR 45,000 to EUR 50,000 per year;
- Qualification of operating a photovoltaic system as not being harmful for purposes of a charitable purpose; and
- Introduction of e-sports as a new charitable purpose.
The signature from the president is expected to take place in the coming days and should be a mere administrative act. The bill will then be published in the federal gazette and enter into force on the day after its publication.
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