Transformation effective from 1st January
Starting from the first day of 2023, Germany has implemented a series of noteworthy changes aimed at providing economic relief amidst inflation. These changes primarily focus on tax regulations, the introduction of Citizen's Basic Income, changes in child benefit and housing benefit, and the implementation of price caps.
Tax Changes
The changes in the tax system are designed to lessen the tax burden for citizens. From October 1, 2022, to March 31, 2024, a temporary reduced Value Added Tax (VAT) rate of 7% will apply to energy supplies such as natural gas and biogas via gas networks, and heat via heating networks. The reduced VAT rate for restaurant and catering services has also been extended until the end of 2023.
Supplies related to photovoltaic systems installed near residential areas or with capacity under 30 kW are now subject to 0% VAT. The income tax system continues to protect a basic subsistence minimum, which was recently increased retroactively for 2024 to €11,784 for singles and double for married couples, ensuring income below this threshold remains tax-free. Tax incentives for electric vehicles have also been introduced, with a raised gross list price threshold for reduced benefit-in-kind taxation for battery electric company cars, increased to €100,000 as of mid-2025.
Citizen's Basic Income
In 2023, Germany introduced the Citizen’s Income (Bürgergeld), replacing previous unemployment/social welfare benefits. Standard rates were increased by about 11% to address inflation and low-income hardship. This increase was followed by another 12% raise in 2024. However, a freeze on benefit levels was announced for 2025 based on a legislative formula. Despite these increases, analyses by Human Rights Watch indicate that the Citizen’s Income remains insufficient to fully cover poverty risk levels for some households, particularly single-parent families.
Child Benefit and Housing Benefit
While specific 2023 changes to child benefit and housing benefit are not detailed explicitly, they are generally linked and adjusted alongside social security payments including Citizen’s Income. The 2023 increase in social payments suggests approximate rate rises for these benefits too, consistent with inflation adjustments in German social law.
Price Caps
The provided materials do not specify new general price caps effective from January 2023. However, the VAT reductions on energy and food service sectors function as indirect price interventions to mitigate inflation impact.
In summary, Germany’s key 2023 policy changes include targeted VAT reductions primarily on energy and hospitality sectors, substantial increases to Citizen’s Income, and steady protections on tax-free income thresholds, all designed to soften inflation and cost-of-living pressures. Specific detailed statutory changes to child and housing benefits for 2023 appear bundled within broader social security reforms but are not separately enumerated in the search results.
These changes will be in effect from January 1, 2023, and will impact the legal or regulatory landscape, not consumer products or services. The child benefit will increase to 250 euros per child, and the maximum amount of the child supplement will also increase to 250 euros per child. Housing benefit will be doubled on average to 370 euros. Up to 2 million households can now benefit from housing benefit, up from 600,000. The new regulations will also include price caps for gas, electricity, and district heating. Price caps for these utilities will come into effect, but they will be adjusted retroactively for January and February, and will not be visible on accounts until March. The changes to child benefit, housing benefit, and tax payments are effective from January 1, 2023, and the Citizen's Basic Income replaces Hartz IV and will be phased in.
- The changes in Germany's tax system aim to lessen the tax burden for citizens, as shown by the temporary reduced Value Added Tax (VAT) rate for energy supplies and restaurant services.
- In 2023, Germany introduced the Citizen’s Income (Bürgergeld) as replacement for previous unemployment/social welfare benefits, and this income has been substantially increased to address inflation and low-income hardship.
