DRAFT: Germany would end automatic VAT-group formation and require a declaration instead

What changed in detail

This is a government draft bill, not enacted law. Germany’s Federal Cabinet approved the government draft (Regierungsentwurf) of the Jahressteuergesetz 2026 on 12 August 2026. As drafted, it would insert a new section 2c into the Umsatzsteuergesetz, replacing the current automatic-qualification test for VAT group taxation (Organschaft): the legal effects of a VAT group, and the addition of further group members, would arise only once the controlling entity files a declaration with its competent tax office, with effect for the future. The declaration could likewise be revoked prospectively, for the whole group or for individual members. Under Article 32(7) of the draft, this provision would enter into force on 1 July 2029. The bill has been introduced into the legislative process and has not been enacted.

What it means

Nothing changes today, and nothing would change for nearly three years even if this passes unamended — 1 July 2029 is the proposed date. The shift itself is structural, though: VAT grouping today forms automatically whenever the qualification test is met, and this draft would replace that with an affirmative filing step, putting the timing of group formation — and its unwinding — under the taxpayer’s own control rather than a backward-looking factual test. Groups relying on automatic qualification should track this bill through the legislative process rather than assume the current mechanism is permanent.