VAT in the Restaurant Industry: Reduced Rate vs. Standard Rate — What Applies When?

Note: the statutory rates, legislation, and thresholds described in this article apply to German VAT law (Umsatzsteuergesetz). Operators in other jurisdictions should consult their local tax authority or advisor, as the rules differ significantly by country.

VAT in hospitality is one of those topics where even experienced restaurant operators regularly need to double-check. That is not a sign of carelessness — the boundary between the reduced rate and the standard rate is more complicated in daily practice than it looks on paper, and the rules have changed several times in recent years.

This article provides a practical overview of the current legal position in Germany, addresses the most common edge cases, and explains what it means for your POS configuration.

The baseline: two rates, one industry

In Germany, the fundamental rule is:

7% VAT on food sold for takeaway or delivered off-premises (so-called off-premises turnover)
19% VAT on food and services consumed on the premises (dine-in)

Beverages form a separate category: they are generally taxed at 19%, regardless of whether they are consumed in the restaurant or taken away. Exceptions exist for certain products — more on that below.

The distinction sounds simple but quickly becomes opaque in practice when food is offered both for takeaway and for eating on-site, or when combination offers of food and drink appear on the menu.

What reverted in 2024?

The temporary reduction of the VAT rate on restaurant turnover to 7%, introduced during the COVID-19 pandemic, expired on 31 December 2023. Since 1 January 2024, the standard rate of 19% again applies to food consumed on the premises.

In practical terms: operators who did not update their POS software after the pandemic, or who missed the reversal, may be working with incorrect tax rates. This is not a minor issue — a tax audit will result in back payments plus interest.

The detail: dine-in vs. takeaway

Dine-in — 19%

Any transaction where the hospitality business provides a service beyond simply handing over food counts as dine-in: seating, table service, cutlery, glasses, access to toilets and cloakroom. As soon as that infrastructure is provided, the transaction is classified as a restaurant service — and the full 19% rate applies.

This also covers outdoor areas: a terrace, a beer garden, or a market stall with standing tables and waste bins can be classified as dine-in if the operator has visibly created a dining opportunity.

Takeaway — 7%

For takeaway, the restaurant simply hands over the food. No seating, no cutlery, no service. The customer takes the item away and consumes it elsewhere. Classic examples: delivery service, collection counter, counter without seating.

The decisive factor is the objective assessment at the time of sale. The Federal Fiscal Court has confirmed repeatedly that the customer’s actual behaviour after the sale is irrelevant. If someone orders a pizza at the counter and says “to go”, 7% applies — even if they subsequently sit down at outdoor tables that were in fact meant for other customers.

Conversely, the tax authority cannot subsequently reclassify dine-in turnover as takeaway simply because a customer packaged the food and left with it.

The grey zone: food courts and mall catering

In shopping centres, at railway stations, and on markets, the distinction is particularly tricky. Often it is not the restaurant operator themselves who provides the seating, but the centre management. The tax administration has clarified: if tables and chairs are in the area of a single stall, dine-in turnover should be assumed. If the seating is shared and not attributable to a single vendor, takeaway is possible — provided no individual service is rendered.

Anyone operating in this grey zone should document the classification with their tax advisor so that a clear rationale is available if audited.

Beverages: always 19%

Beverages are generally subject to 19% VAT — regardless of where they are served. This covers alcoholic drinks, soft drinks, coffee, and tea.

Exception: milk and certain milk-based drinks with a milk content of at least 75% qualify for the reduced 7% rate. In practice this is mainly relevant for certain smoothies; it rarely affects mainstream restaurant trade.

Tap water served as a meal accompaniment without charge also attracts 7%. Bottled mineral water sold commercially is taxed at 19%.

Combination offers: split or unified rate?

What about a set lunch of soup, main course, and a drink? Or a breakfast package of coffee, bread rolls, and cold cuts to take away?

For combination offers, the rule is: if the components are provided as a unified service and the food element predominates, the entire turnover can be taxed at the rate of the main component. In practice, however, this is often a matter of interpretation.

The safer method — and one accepted by the tax administration — is apportionment by the ratio of individual prices: food at 7% (takeaway) or 19% (dine-in), drink at 19%. A good POS system should be able to map this split automatically — both for the cash journal and for the VAT return.

POS systems and fiscal devices: what the configuration must do

The tax classification is only as good as the system that implements it. Since 1 January 2020, Germany has required a certified technical security device (Technische Sicherheitseinrichtung, TSE) for electronic POS systems. The TSE logs all transactions in a tamper-proof manner — including the applicable tax rates.

For hospitality businesses with both dine-in and takeaway turnover, this means:

POS requirements:

Separate booking categories for 7% and 19%
Clear distinction between “Dine-in” and “Takeaway” at receipt level
Correct taxation of combination items (food + drink)
Complete TSE logging of all transactions

A pizzeria operator from the Rhine-Main region describes the problem precisely: “For years we had been booking all delivery orders as standard turnover without any split. It was only when we switched systems that it became clear the 7% turnover was nowhere properly itemised. That could have ended badly in an audit.”

Correcting such legacy errors is possible but time-consuming — far better to set the system up correctly from the start.

Delivery services and own ordering systems

For orders placed through Lieferando, Wolt, or your own ordering system, deliveries are generally subject to 7% on food. Note: this applies to doorstep delivery — not to click-and-collect orders where the customer comes to the restaurant and waits there briefly, which depends on the circumstances.

If the restaurant carries out the delivery itself, the position is clear: 7% on food, 19% on beverages. If a third party (e.g. Lieferando) acts as intermediary and the restaurant does the delivery, the tax classification remains with the restaurant.

Operators of their own ordering systems should verify that the platform automatically separates tax rates correctly and that receipts sent to the customer by email display the tax breakdown correctly.

Common errors in practice

1. Items saved with the wrong tax rate Especially after menu updates or when entering new items, operators forget to set the correct tax category. Recommendation: systematically check tax categories with every menu update.

2. No distinction between dine-in and takeaway in the system Systems lacking this distinction will inevitably produce incorrect tax reporting. This is not just a bookkeeping problem — it is a compliance risk.

3. Beverages booked at 7% across the board This occurs when operators apply the food exemption to all products. Beverages remain at 19%.

4. Combination offers not apportioned If a set menu is booked at a flat price without splitting into food and drink components, a tax error arises that compounds at higher volumes.

Recommendations for 2026

Audit your POS system: Has the reversal from 7% back to 19% for dine-in turnover been correctly configured since January 2024? If not, correct it immediately and adjust prospectively.
Spot-check receipts: Randomly verify that POS receipts show the correct and complete tax breakdown — split by rate.
Train staff: Employees working at the register should know when to select “Dine-in” and when “Takeaway”. A brief training session or a laminated reference card at the register is often sufficient.
Involve your tax advisor: Anyone with turnover in grey areas (food courts, mixed-use spaces, ambiguous outdoor seating) should have the classification documented — ideally with a written opinion from their tax advisor.
Monitor software updates: POS software providers should roll out changes to legislation automatically. Verify that your provider actively notifies you of tax-rate-relevant updates.

VAT in hospitality is not a complicated subject if the fundamentals are right. The decisive foundation is a POS system that maps the distinction between rates cleanly and logs every transaction without gaps. Everything else — training, menu maintenance, receipt verification — builds on that.