Citizens and consumers expect many changes again in July. For example, VAT reductions take effect, and pensioners can expect to increase. The following is an overview of all changes.

1. Reduce VAT from July 1st
As part of the stimulus plan for the new crown epidemic crisis, the federal government hopes to reduce the half-year VAT rate from 19% to 16% from July 1. The reduced tax rate has dropped from 7% to 5% and is applicable to many groceries and daily necessities. However, the Bundestag and the Bundestag must still reach a consensus-this work should be completed at a special meeting on June 29.

The reduction of value-added tax aims to promote economic development and make purchases in supermarkets, furniture stores, electronics stores, or car dealerships cheaper. Federal Finance Minister Olaf Scholz (SPD) described rate cuts as a "very powerful driving force" to increase purchasing power. According to calculations, consumer prices may fall by about 1.6%.

It is unclear to what extent the VAT reduction is actually passed on to consumers. Large supermarket chains and discount stores have announced that they want to give all discounts to all customers.

2. Children's allowance will take effect in July
The child bonus of 300 euros per child is also part of the economic agreement. Children’s bonuses should first benefit low- and middle-income families. The plan is to pay in installments through monthly child welfare payments. In September and October, 150 euros will be paid in installments each month. However, not all families will benefit from the children’s bonus, because the bonus can offset the child’s tax allowance, but it does not count towards the basic guarantee.

3. Pensions in the west and east are increasing
From July 1st, about 21 million pensioners in Germany will get more money. As part of the annual pension adjustment, pensions in western Germany increased by 3.45% and pensions in the new federal state increased by 4.20%. Therefore, pensions in the east are gradually approaching those in the west. However, not all pensioners receive the pension increase on the same date, you need to know in detail.

If you have a plan to operate, study and live in a German registered company. Need to know more about the information related to you in Germany, contact our company, our German lawyer team will assist you, and provide all more convenient and affordable services.