7 July 2026 • 2 minute read
Germany draft Annual Tax Act 2026 proposes opt-in VAT grouping regime
The German Ministry of Finance published a draft Annual Tax Act 2026 in May 2026. The draft’s main VAT measure is a fundamental reform of German VAT grouping. Under current law, a VAT group arises automatically where the financial, economic and organisational integration requirements are met. The proposed new section 2c UStG would add an express declaration to the tax authorities as a further requirement, so the VAT group would generally only take effect for the future.
The draft would also clarify that partnerships may be VAT group members. It includes specific rules on correction, reversal, interest and liability where a VAT group was incorrectly assumed or applied. The new regime is expected to apply from 1 January 2029, with declarations possible before that date. While the reform should reduce the risk of “undetected” VAT groups, businesses will still need to test whether the substantive integration requirements are met.
Key takeaway / recommendation
Groups with German entities should map current and potential VAT group relationships, assess whether an opt-in would be advantageous and prepare governance for future declarations. Existing VAT compliance positions should be reviewed before the rules become effective, particularly where historic VAT group conclusions were uncertain.
