January Effect

January is slowly coming to a close. I am looking forward to warmer, sunnier days ahead. I wanted to start today’s blog post with an update on the recent voting from last Friday on the Modernisation of the German Nationality/Dual Citizenship Act.

The draft law was voted on with the following outcome:
382 Voted for
234 Voted against
23 Abstained

I am a bit of a political junkie, so for anyone who might be interested, here is a breakdown of the voting on the Modernisation of the German Nationality Act.

This is seen as a very positive step for many of us foreigners here in Germany, who are excited about the opportunity to receive German citizenship and while maintaining their original citizenship.

The next steps for the law are to be ratified by the Bundesrat (a constitutional body within a German federal system) in which laws are then reviewed and approved by the 16 federal states. This body provides a forum to discuss concerns and interests of the both the states and the federal republic and is consider part of the system of checks and balance of power). The next Bundesrat sittings are scheduled to take place on the 2. February and 22. March. The interior minister believes the law was drafted in such a way that the law cannot be blocked in the Bundesrat. The law will then need to be signed by the President and after which civil servants throughout Germany can then begin to implement the policy. The targeted implementation date is 1. April 2024 or the second quarter. We will update you as we learn more about the law’s timeline and how it will effect the landscape of immigration in Germany.

Another change that occurred in January is that restaurant taxes increased or returned to their pre-pandemic rates. Here’s what you will see on your receipts and online food orders:

  • 19% in restaurant and for catering services (was reduced to 5% on 1. July 2020 through the end of the calendar year and increased to7% rate on 1. January 2021 through 31. December 2023)
  • 7% on delivery or distribution of food (was reduced to 5% on 1. July 2020 through the end of the calendar year and increased to its current rate on 1. January 2021)
  • 19% on beverages (was reduced to 16% on 1. July 2020 through the end of the calendar year and increased to its current rate on 1. January 2021. There are some exceptions for beverages like milk and water that remain at 7%)

The German government originally enacted a tax reduction plan in the Spring of 2020 to alleviate the financial strain caused by the Corona Pandemic. One facet of the three relief packages offered is a tax subsidy for food supplied in restaurants, cafes and catering services. The tax reduction was then extended through 31. December 2023. In November 2023, the German parliament opted not to further extend this subsidy, with an estimated value of 3 million euros annually. Experts fear that this will have a negative impact on the overall gastronomy industry which is doubly burden by rising food and energy costs. Inflation is currently estimate at 3.7% as of December 2023 and at 5.9% for the whole year, with a 4.5% increase for energy prices and a 5.5% increase for the consumer price of food.

As a little bit more information, VAT (valued added tax) is a sales tax. This means, the proceeds of sales and services are subject to a tax under the common system of the European Union (EU). The standard EU rate is 19% (7% on certain items, such as food and books, are taxed at 7% and the sale and installation of photovoltaic systems and certain related devices are tax-free). Many European countries, such as Spain, Italy and France, have a lower tax rate of 10%. In Germany, you will see the terms sales tax Umsatzsteuer (Ust.) und VAT Mehrwertsteuer (MwSt.) and their abbreviations used interchangeably, although the correct term for tax purposes is “sales tax”. However, VAT has not only established itself as a colloquial term, but is also often shown as VAT on vouchers and receipts or online. The term VAT is actually derived from the form of taxation. Because sales tax is calculated according to the “value added principle”. The input tax is also a VAT.

For a glass of wine and a salad, your receipt might look like this:

Café Local Worldwide
(Total spent in euros)
(pre-tax value of food or goods)
19% MwSt
(The tax paid)

It’s important to note that the prices listed in the supermarket or on a menu are the final price inclusive of tax. This means if a glass of wine is listed as 10,50€ on the menu, its pre-tax value is 8,82€ and tax is 1,68€.

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