Update: Bundestag passes bill for a temporary reduction in VAT on gas supplies and one-time inflation compensation payment

In its parliamentary session of today the Bundestag has approved certain measures towards reducing gas costs for consumers and measures to address general cost increases (inflationary costs).

The bill reduces the VAT rate on the supply of gas through the natural gas network to 7 per cent from 1 October 2022 to 31 March 2024. The Federal Government expects taxable companies to pass this reduction on to citizens on a 1:1 basis. If it is passed on in full, a corresponding price reduction and thus a noticeable reduction in the burden on citizens should be made possible.

Also passed was the tax exemption for payments of a so-called inflation compensation premium by employers to mitigate the burden of inflation in the amount of 3,000 euros until the end of 2024, which had also been introduced into the parliamentary process. This is a tax-free allowance. The prerequisite for tax exemption is that the benefit is granted in addition to the salary that is owed anyway.

Update (7 October 2022)

In its session today the Bundesrat has approved the bill for a temporary reduction in VAT on gas supplies and one-time inflation compensation payment.