Restaurant Taxes and Accounting

Taxes and accounting for your restaurant

The administrative requirements for opening and running a successful restaurant can be tough to decipher. Here's our extensive overview of any requirement, big or small, you will need to adhere to regarding taxes and accounting.

About Restaurant Taxes

1. taxes for your restaurant 

About Restaurant Taxes

There are several different taxes you will need to consider when opening a restaurant and selling your products to customers. It is not only crucial to know how much money you will need to pay the financial authority, but also how this sum is comprised. A true understanding of the tax requirements will allow you to make smart financial decisions and therefore will bring success to your restaurant.

The taxes that will come into action for your restaurant are:

  • the value added tax (VAT),
  • the trade tax,
  • the income tax and/or the corporation income tax,
  • the wage tax of employees,
  • taxes for the reference value.

Another tax which can arise is the property tax.

Common Taxes for Restaurants

2. types of taxes

Common Taxes for Restaurants

2.1 Value added tax

Any restaurant that sells food items and beverages is obligated to pay the value added tax to the financial authority. The value added tax has many different tax rates for various food items. The general two rates are 7% VAT and 19% VAT.

Generally, sit-down restaurants need to charge 19% VAT and snack bars and to-go restaurants need to charge 7% VAT. This is justified in the sense that in a sit-down restaurant which offers seating for customers, the restaurant provides a service to the customers by serving them. In a to-go restaurant or in a little snack bar, this service is not given. Even if a customer orders food to pick-up at a sit-down restaurant, the lower 7% VAT applies. Therefore, in a coffee shop for instance, it is important to ask the customers whether they are taking their drink to go or whether they are planning to take a seat in your café. “Taking a seat in your café” also only refers to seats that are provided by your establishment. A public bench that happens to be right outside of your coffee shop does not evoke the greater VAT rate of 19%, but much rather falls into the category of taking the coffee to-go. However, there are exceptions to this tax rate. Mineral water and cow’s milk call for the 7% VAT, no matter if they are served in the restaurant or café at a table or if they are offered to-go. The cow’s milk tax requirement also comes into effect in coffee drinks which have at least a 75% milk content, calculated according to the weight of the coffee drink. Black coffee, however, is classified as a regular drink and calls for the 19% VAT rate. Keep in mind that the reduced 7% VAT rate only applies to cow’s milk and not any other plant-based milk alternatives.

Another exception from the general tax requirement are luxury food items, which are consistently taxed according to the 19% VAT rate. These items are, for instance, lobster, oysters, and snails. This means that even if customers take a lobster meal to-go and do not receive any services by your staff, this meal is still taxed according to the greater 19% VAT rate.

The most important takeaway we want you to remember is the distinction between to-go food items and eat-in food items. For to-go items, you need to charge 7% VAT and for food items that are served and eaten in your restaurant, you need to charge 19% VAT.

Restaurant trade tax

2.2 Trade tax

Every entrepreneur that runs a business is required to pay trade tax. The tax rate for the trade tax differs from local authority district to local authority district. Factors that flow into the calculation of the trade tax amount are:

  • the trade income of your restaurant,
  • the tax index, which is usually 3.5 %,
  • the lifting rate specific to your local authority district.

These three factors are multiplied by one another, resulting in the trade tax. There are some reductions to the sum of the trade tax which depend on the legal form you have chosen for your restaurant. If you have registered your restaurant as a sole proprietorship or as a civil-law association (GbR), you may be able to deduct a tax allowance of up to 24,500 € from your annual tax payments.

Furthermore, depending on your restaurant’s legal form, some forms of income and some expenses are not calculated towards the sum of the trade income of your restaurants. To properly assess any exceptions and allowances and to answer any unanswered questions, we strongly advise to consult a tax consultant.

Corporation income tax

2.3 Income tax/corporation income tax

Whether you need to solely pay income tax or whether you need to pay corporation income tax depends on your restaurant’s legal form. In general, the income tax comprises the tax you need to pay on your personal share of the profit of your restaurant.

If your restaurant’s legal form is a sole proprietorship or a civil-law association (GbR), you as a shareholder or as the sole owner only need to pay the income tax. This income tax needs to be declared and paid on your personal income tax return. The higher the profit, the higher the income tax. However, there is also a basic allowance that can be deducted from your profit. In other words, this basic allowance is tax-free. The amount of the basic allowance depends on your personal tax class. If you are not married, this allowance currently (in 2022) amounts to 9,984 €. If you are married, this allowance currently (in 2022) amounts to a total of 19,968 € for both you and your partner.

If your restaurant’s legal form is registered as a limited company (GmbH), or as a liability company (UG), the corporation income tax arises. The corporation income tax amounts to 15.5 % of your restaurant’s taxable profit. This taxable profit is calculated with the help of a balance sheet, and a profit-and-loss calculation. Seek help from a tax consultant for this process. In addition to these 15.5 %, your restaurant needs to pay a solidarity surcharge amounting to 5.5 % of your taxable profit. If your restaurant falls into the category of a limited company (GmbH) or a liability company (UG), there are no tax allowances.

Restaurant Employee Wage tax

2.4 Wage tax of employees

When you are employing workers in your restaurant, you need to pay attention to your duties as an employer regarding the wage tax. The wage tax itself is not a tax that you need to pay from your own income, but much rather a tax that you need to keep from the income of your employees and then need to pay to the financial authority.

The taxes you need to keep from your employees’ pay are their wage tax, their solidarity surcharge, and, if they are part of a church, their church tax. This money then needs to be paid to the financial authority by you until the 10th of each month.


2.5 Taxes for the reference value

The taxes for the reference value refer to the sum of values which you as the restaurant owner consume of your own inventory. Basically, the financial authority assumes that you as a restaurant owner eat in your own restaurant. For 2022, this amounts to an annual charge of 3,401 €.


2.6 Property tax

When you have property of your restaurant and are not just renting it, you will need to pay property tax. The amount is calculated according to the value of your restaurant.
Restaurant Accounting: Methods & Tools

3. accounting for your restaurant

Accounting in your restaurant is mainly required to fulfill the burden of proof for the financial authority. Additionally, accounting is crucial to have a structured and extensive overview over all the transactions happening in your restaurant. Only when you document every single earning and every single expense, you can tweak and improve your restaurant’s finances and in the long run strive towards more success. For instance, you can detect where you might have excessive charges and where you can switch to financially smarter options.

In terms of accounting in your restaurant, you need to keep a cash book and you need to keep all receipts.

Accounting cash book

3.1 Keeping a cash book

To successfully fulfill the accounting requirements for your restaurant, you most importantly need to keep a cash book. This is crucial to prove your credibility to the financial authority. Businesses that do not keep a cash book or have an unorganized cash book can evoke the impression of tax fraud. You are required by law to keep a cash register and to keep a cash book, whilst it does not matter how large your restaurant is.

The purpose of a cash book is to provide an overview of the amount of cash in your cash register. All cash revenue and all cash expenses need to be documented in your cash book. After closing your restaurant every day, you need to review whether the target inventory of your cash book corresponds with the actual inventory in your cash register. For an even easier documentation of all earnings and expenses, we strongly recommend keeping a copy of all receipts, including purchases of something for your restaurant by you or bills of customers after they have dined in your restaurant.

Avoiding faulty cash book

3.2 Avoiding a faulty cash book

Keeping a properly structured cash book is important to avoid any issues with your financial authority. A cash book exists to document all cash movements and to prevent embezzlement of cash earnings, which would result in tax fraud. In Germany, tax fraud is a criminal offence and can have detrimental consequences.

The financial authority is authorized to come into your restaurant and perform a tax audit at any time. During such a tax audit, the financial authority will check your cash book and check whether all the documented earnings and expenses correspond with the actual profit in your cash register.

Digital cash book

3.3 Using an electronic cash book

Any restaurant using an electronic cash register is required to also keep an electronic cash book. An electronic cash register and an electronic cash book are the most modern option and are also the easiest and efficient to use.

In the past, many restaurants used Excel to record their earnings and expenses. In Excel, however, the data can be changed later and is not permanent. Since 2017, the guidelines require the data to be unchangeable once it is recorded. Thus, you will need to use a digital cash book software to record your cash movements. We recommend researching the most popular and commonly used software. Make sure to give all employees an introduction into the software before anybody starts using it.

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To Sum Up

4. conclusion - restaurant taxes and accounting

All in all, the most important takeaways from this overview should be the different types of taxes and the importance of keeping a cash book. To reiterate, the obligatory taxes are the value added tax, the trade tax, the income tax or the corporation income tax, and the wage tax of your employees. A cash book is crucial to record and document your restaurant’s financial movements.

Taxes and accounting for your restaurant can be a subject which is tough to understand. We hope this overview gives you a general idea of all the requirements and rules to run a successful restaurant without getting into financial trouble. Nonetheless, we recommend seeking help from a professional if you are unsure about something.

Frequently Asked Questions

5. FAQ - taxes and accounting

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