The Federal Cabinet has approved the 2025 tax amendment bill, introducing an increase in commuter allowances and a reduction in the tax rate for restaurants and catering services. The Ministry of Finance announced on Wednesday that the measures are aimed at alleviating financial burdens stemming from crises such as the COVID-19 pandemic and rising energy costs.
A key component of the bill is the increase of the distance allowance to 38 cents per kilometer, effective from January 1, 2026, starting with the very first kilometer traveled. Previously, this rate only applied beyond the 21st kilometer.
“By raising the commuter allowance to 38 cents from the first kilometer driven, we are creating greater fairness between urban and rural areas” stated Federal Finance Minister Lars Klingbeil. “People who work hard and travel long distances between their homes and jobs will experience a noticeable reduction in their financial burden” he added, emphasizing the importance of this change for employees with modest to mid-range incomes.
Furthermore, the value-added tax (VAT) rate for restaurants and catering services will be reduced from 19 percent to 7 percent, also starting January 1, 2026. This measure is intended to support the hospitality sector and, according to the Federal Government, will also result in lower prices for consumers. The reduction will benefit establishments beyond traditional restaurants, including bakeries, butchers and the grocery retail sector.