Germany

VAT Tax Guide for Germany

April 30, 2024
VAT Tax Guide for Germany

A thorough understanding of the VAT system in Germany is crucial for businesses operating within or trading with Germany.

VAT Information

Current VAT Rates in Germany:

  • Standard rate: 19%

  • Reduced rate: 7% for certain goods and services, including books, food products, and hotel services.

VAT Registration Thresholds and Requirements

  • Resident Businesses: In Germany, resident businesses are required to register for VAT if their annual sales exceed €22,000. This is a measure designed to exempt small businesses from the burden of VAT registration and compliance.

  • Non-Resident Businesses: Non-resident businesses must register for VAT in Germany immediately upon commencing taxable activities, regardless of their turnover. This applies to any business that conducts transactions for which it is liable for VAT in Germany.

  • Intra-EU Distance Sales of Goods and B2C Supplies of Services: As part of the EU rules effective from July 2021, the threshold for intra-EU distance sales of goods and cross-border supplies of telecommunications, broadcasting, and electronically supplied services to non-taxable persons in the EU is €10,000 for the total annual sales across all EU member states. Above this threshold, the VAT registration in the customer's country is required, which includes Germany.

  • Non-EU Established Suppliers of Electronically Supplied Services: Non-EU businesses providing electronically supplied services to consumers in Germany (or any other EU member state) are required to register for VAT under the non-Union MOSS scheme irrespective of their turnover.

Process and Documentation Required for VAT Registration

  • Online Registration: The process can be initiated online via the BZSt-Portal (Bundeszentralamt für Steuern, or Federal Central Tax Office).

  • Required Documentation: This typically includes a valid ID or company registration documents, proof of business activities in Germany, and other specific documents depending on the nature of the business.

  • Registration Form: The form "Fragebogen zur steuerlichen Erfassung" must be completed, providing details about the business and its activities.

Tax Representative in Germany
  • Requirement: Non-EU companies are generally required to appoint a fiscal representative to handle their VAT registration and obligations in Germany. This representative must be a resident or a company based in Germany.

  • Role: The fiscal representative assumes responsibility for meeting all the VAT obligations of the non-resident business, including filing returns and making payments.

VAT Filing and Payment

Due Dates

Monthly or quarterly, depending on the business size.

Filing Method

  • VAT returns must be filed electronically using the ELSTER platform, which is the online tax processing system operated by the German Federal Central Tax Office (Bundeszentralamt für Steuern or BZSt).

  • All VAT-related information, including taxable income, input VAT (Vorsteuer), and other deductible items, are declared through this system.

Advance VAT Returns

  • In addition to regular VAT returns, businesses often have to submit advance VAT returns along with advance payments for VAT. These payments are based on the tax amount of the previous year and are adjusted in the annual VAT return.

Payment Deadlines

  • VAT payments are generally due on the 10th day after the end of the filing period. For monthly filers, this would be the 10th day of the following month; for quarterly filers, the 10th day after the end of the quarter.

Payment Methods

  • Payments can be made via bank transfer to the tax office’s account. It’s important to use the correct payment reference number (Steuernummer or VAT ID) to ensure that the payment is correctly allocated to your tax account.

  • Some businesses may set up direct debit arrangements with their banks to automate the payment process based on the amounts declared in their VAT returns.

Adjustments and Corrections

  • If a business discovers errors in previous VAT returns, they can correct these by submitting amended returns. Adjustments will generally affect the VAT liability of the current or future periods.

  • Annual VAT Adjustment:

    • After the end of the fiscal year, businesses submit an annual VAT return. This allows them to adjust the sum of all advance payments against the actual VAT liability calculated from the total annual operations.

Special Considerations

  • VAT Refunds: If a VAT return results in an overpayment, the excess amount can be refunded or credited against future payments.

  • Record Keeping: Businesses must keep detailed records of all taxable transactions, invoices, and receipts for at least 10 years, as these documents may be needed for tax audits.

VAT for International Businesses

Imports

  • VAT on Imports: Goods imported into Germany are subject to VAT. The VAT rate is the same as that applied to domestic goods, typically 19% or a reduced rate of 7% for certain items.

  • Payment of VAT: VAT on imports is generally paid at the point of entry and is recoverable as input tax, subject to normal VAT deduction rules. This can usually be claimed back on the business's next VAT return, helping to improve cash flow.

  • Customs Duties: Depending on the origin and nature of the goods, customs duties may also apply and are calculated separately from VAT.

Exports

  • Zero-Rated Exports: Goods exported from Germany to non-EU countries are generally zero-rated for VAT purposes. This means that no VAT is charged on the sale, but the exporter must provide proof of export (e.g., shipping documents) to qualify for zero-rating.

  • Intra-EU Supplies: Sales of goods to other EU businesses where the VAT number of the purchasing business is provided are treated as intra-Community supplies and are zero-rated. The recipient is responsible for accounting for any VAT due in their country under the reverse charge mechanism.

E-Commerce and Digital Services

Mini One Stop Shop (MOSS):

  • Overview: The MOSS scheme simplifies the VAT process for businesses that supply telecommunications, broadcasting, or digital services to consumers within the EU. It allows them to register and pay VAT in a single EU member state, regardless of where in the EU their customers are located.

  • Non-EU Businesses: Non-EU businesses can use the Non-Union MOSS scheme to handle VAT on sales to EU consumers without needing to register in every EU country where they have customers.

  • Changes from 2021: With changes introduced in July 2021, the OSS (One Stop Shop) has expanded to include not only digital services but also distance sales of goods within the EU and certain domestic supplies made by electronic interfaces.

E-Commerce VAT Rules:

  • New VAT Rules from 2021: The new e-commerce VAT rules aim to ensure VAT is paid where goods are consumed. Online marketplaces are often deemed to be the supplier of goods sold to EU consumers, responsible for collecting and remitting VAT.

  • Distance Selling Thresholds: The previous distance selling thresholds were replaced by a new EU-wide threshold of €10,000. Above this, VAT must be charged at the rate applicable in the customer’s country.

  • Registration for VAT: E-commerce businesses exceeding this threshold must register for VAT in the customer's country or use the OSS scheme to declare and pay VAT.

Compliance Tips

  • Documentation: Keep detailed records of all imports, exports, and intra-EU transactions to support VAT claims and compliance.

  • VAT Invoicing: Ensure that VAT numbers are correctly displayed on invoices, especially for intra-EU transactions where reverse charging applies.

  • Regular Updates: Stay informed about changes in VAT legislation, especially post-Brexit adjustments and updates to e-commerce regulations.

Conclusion

Navigating VAT in Germany requires careful attention to compliance and regulatory changes. Consulting with a VAT professional may provide additional clarity and assistance.

Additional Resources

For more information, visit the Federal Central Tax Office website.


Best Regards, Vatabout team