Recently, the Federal Ministry of Finance issued a draft bill for an Annual Tax Act 2026. From a VAT perspective, the proposed new rules on VAT grouping are of particular interest. A new sec. 2c is to be introduced in the German VAT Act, providing that partnerships may qualify as controlled companies within a VAT group. More importantly, the submission of a declaration on the existence of a VAT group will become an additional requirement for VAT grouping. To this end, the German VAT Implementing Regulation is to be amended, too. In cases of an incorrect declaration of a VAT group, sec. 2c provides for new procedural rules, as well as a specific liability provision.

The German government plans to increase VAT rates as from 1 January 2027. The formula is “21–10–0”, which simply means that the standard VAT rate is set to rise to 21% and the reduced VAT rate to 10%. In order to ensure that the VAT increase does not disproportionately affect low-income households, there are also plans to apply the zero VAT rate to foodstuffs.