BFH Clarifies VAT Allocation Rules for Bundled Meal Offers

In two decisions dated January 22, 2025 (BFH XI R 19/23 and XI R 22/22), the German Federal Fiscal Court (BFH) provided important clarification on the VAT treatment of bundled sales, particularly in the fast-food and food service sector.

The cases concerned discounted meal combinations (“Spar-Menüs”) sold by a fast-food chain. Each component of these bundles (e.g., burger, fries, drink) is subject to a different VAT rate. The taxpayer applied a cost-based allocation method (the so-called “Food-and-Paper” method) to determine the respective VAT portions.

The BFH held that any allocation method resulting in a price for a discounted item that exceeds its regular stand-alone price is impermissible. Allocation must reflect the economic value of the components, and pricing distortions are not acceptable—even if they are the result of standardized or cost-based formulas.

At the same time, the BFH confirmed that if a taxpayer applies a subjectively justifiable method in good faith and cooperates fully with the tax authorities during audits, the authorities should not impose additional safety margins or penalties solely due to methodological flaws.

Who is affected?

Businesses that offer bundled products with components subject to differing VAT rates—especially in the hospitality, food service, and retail sectors.

What should the affected companies do?

• Review and, if necessary, revise allocation models to ensure that no item in a bundle is assigned a price exceeding its stand-alone price.
• Document allocation logic carefully and ensure audit transparency to avoid potential penalties.
• Avoid strictly cost-based allocation methods that do not consider actual transaction values.
• In the case of doubt, seek a binding confirmation from the competent German tax office.

A&M Tax Contact: Matthias Luther