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Germany Clarifies VAT Tax Break For Food Supplies

by Ulrika Lomas, Tax-News.com, Brussels

26 March 2013


The German Finance Ministry has recently published information clarifying the scope of the value-added tax (VAT) break accorded for the supply of food and beverages in Germany.

The Finance Ministry highlights the fact that supplies of food are subject to a reduced VAT rate of 7%, irrespective of whether or not the food is of a standard or high quality. Other services are excluded from the scope of the tax break, even if part of the service includes the supply of food.

Consequently, fast food stalls, without seating arrangements, will in future be taxed at the 7% rate of VAT. So-called "meals on wheels," predominantly benefiting the elderly, will also benefit from the reduced rate. As regards school meals, the particular VAT rate to be applied will depend very much on the individual case and the type of food served.

The Finance Ministry decided to issue an administrative instruction not only to assist the tax authorities, but also to inform taxpayers and to clear up any confusion surrounding the complex VAT provisions.

Germany’s standard rate of VAT is 19%. Originally, the reduced VAT rate of 7% was introduced for social reasons and applied to specific product groups including food, books and magazines. This reduced rate now applies to around 50 different product groups, however, and the system has been heavily criticized as being both arbitrary and inconsistent.

TAGS: Finance | tax | value added tax (VAT) | food | tax rates | Germany | tax breaks | services

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