Germany's parliament backs 5 billion euro tax relief for restaurants, commuters

BERLIN, Dec 4 (Reuters) - Germany's lower house of parliament approved a tax relief package worth nearly 5 billion euros ($5.84 billion) a year on Thursday, paving the way for permanent tax cuts for restaurants, commuters and political donors from early 2026.

The legislation, backed by the ruling coalition of conservatives and Social Democrats, will cut value-added tax on restaurant meals to 7% from 19% and extend commuter tax breaks from the first kilometre travelled, rather than the 21st.

The Bundestag vote marks a key step in the government's efforts to ease the financial burden on households and support the service sector.

The measures must still win approval from the Bundesrat, Germany's upper house representing the states, at a Dec. 19 vote.

State governments are demanding compensation for lost tax revenues, setting up a potential clash with Berlin ahead of the final decision.

Restaurant tax relief accounts for 3.6 billion euros of the package, while commuter benefits total 1.14 billion euros. The Bundesrat estimates total revenue losses for states and municipalities at more than 12 billion euros through 2030.

The package also extends tax benefits for low-income workers, increases deductions for trade union fees and political party donations, and raises allowances for volunteer work.

($1 = 0.8565 euros)

(Reporting by Holger Hansen, writing by Maria Martinez, editing by Kirsti Knolle)