Value-added tax in the hospitality industry

VAT in the Hospitality Sector: When does 7% apply and when does 19% apply?

The VAT in the hospitality sector is a complex topic that poses challenges for many restaurant and café operators. The difference between 7% and 19% VAT depends on several factors – including the type of service, the dishes used, and the location of consumption.

Modern digital solutions such as Sundae OS help restaurateurs keep track of their tax categories by structuring relevant data on transactions, revenues, and taxation.

7% or 19% VAT in the hospitality sector?

In general:

• Standard tax rate (19%) for services in the hospitality sector, e.g., when guests consume food on-site and avail of additional amenities such as seating or service.

• Reduced tax rate (7%) for food sold to-go, e.g., take-away or delivery.

Decisive factors for the tax rate:

• Type of hospitality business (restaurant vs. snack bar)

• Dishes used (reusable vs. disposable)

• Location of consumption (in the restaurant vs. to-go)

Differences between restaurants, cafés, and snack bars

Depending on the type of business, different VAT rates apply:

1. Restaurants, Bars & Cafés – 19% VAT

As soon as a guest consumes their meal in a restaurant or café on-site, the full VAT rate of 19% applies. This is because the guest is purchasing not only food but also additional services such as:

• Seating options

• Service by staff

• Use of dishes and cutlery (porcelain or reusable)

• Cleaning of tables and dishes

2. Snack Bars, Food Trucks & Sausage Stands – 7% or 19%

With snack stands, food trucks or sausage stands, it depends on whether seating is available:

• No seating or only standing tables: 7% VAT

• With seating options: 19% VAT

3. Take-Away & Delivery Service – 7% VAT

Food that is sold to-go or delivered is subject to the reduced tax rate of 7%.
Exception: Luxury products like lobster or caviar are charged with 19% VAT.

Why does the type of dish affect VAT?

The type of dish plays a crucial role in tax calculation:

• Disposable dishes (e.g. paper cups, pizza boxes): 7% VAT, as no additional service (cleaning) is provided.

• Porcelain dishes or reusable dishes: 19% VAT, as the dishes are cleaned and this is considered an additional service.

Example:

• Coffee in a paper cup to go = 7% VAT

• Coffee in a cup in the café = 19% VAT

To keep track of the various tax categories, restaurateurs can structure their menu and product categories in Sundae OS to ensure different tax rates remain understandable for accounting purposes.

How is coffee taxed in a restaurant?

The taxation of coffee varies depending on packaging and location of consumption:

• Coffee to go (paper cup): 7% VAT

• Coffee in a café with service (porcelain cup): 19% VAT

Special case for milk and milk products:

• Pure coffee falls under the normal tax rate (19%) when consumed in the café.

• A café latte with at least 75% milk content may be classified as a staple food and taxed at 7% when sold to-go.

Example:

• Latte macchiato to go (high milk content) → 7% VAT

• Espresso in the café → 19% VAT

VAT in the hospitality sector: Important special cases

Restaurateurs must regularly check to ensure their menu is correctly classified into the various tax categories.

Conclusion: What do restaurateurs need to consider?

• Food & drinks in the restaurant: Always 19% VAT

• Food to go & delivery: Usually 7% VAT, except for luxury products

• Snack bars without seating: 7% VAT, with seating 19% VAT

• Coffee & dairy products: Taxed at different rates depending on milk content and packaging

To maintain a clear view of tax matters, hospitality businesses should optimise their processes with digital systems. Sundae OS can assist in documenting the proper categorisation of food and drinks and making tax-relevant data easily accessible for accounting purposes. This keeps invoicing efficient and legally compliant.