EU VAT Guide – Germany

How much is VAT in Germany?

The Standard VAT Rate (Mehrwertsteuer (“MwSt”) in Germany is 19%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and financial services

The exact list of taxable transactions and allocated Germany VAT rate can be found in VAT Germany regulations.

VAT thresholds in Germany

German VAT legislation contains valuable information about VAT thresholds and applicable provisions. Tax Authority officials’ interpretations of the relevant information are also a useful source of information. 

VAT registration threshold for resident businesses: Domestic businesses have no registration threshold. 

However, they can benefit from the small business owners exemption threshold if their turnover has not exceeded EUR 22,000 in the previous calendar year, and they are forecasting that they will not make a turnover higher than EUR 50,000 for the current calendar year.  

VAT registration threshold for non-resident businesses: None

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold

VAT Taxable Activities in Germany

Following the interpretation of the German Sales Tax Act, the business that conducts economic activity with or without income purpose and carries out commercial or professional activity independently and sustainably should levy VAT. Entrepreneurs who fulfill conditions to be treated as small business owners have the right to be exempted from VAT compliance duties. 

Types of taxable activities that trigger the imposition of VAT: 

• The supply of goods and rendering of services in Germany for consideration;
• Import of goods;
• Intra-community acquisition of goods for consideration.

Other case scenarios exist where domestic or foreign businesses should impose German VAT on their transactions. 

Tax Representative in Germany

For non-EU established businesses, having a tax representative for all VAT compliance-related activities is voluntary. There is no such requirement in Germany compared to many Member States that impose an obligation on non-EU established businesses to appoint a tax representative for VAT-related operations. 

Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country.

VAT on Electronically Supplied Services in Germany

Electronically Supplied Services

Within the EU VAT Directive 2006/112/EC, Electronically Supplied Services are services performed through the Internet or interconnected electronic mediums. These services are, in their essence, automated, often operating with minimal human intervention or oversight.

Their provision is intricately tied to the advancements in information technology, without which their seamless delivery would be significantly limited.

In alignment with EU regulations, Germany has adopted the standardized definition of Electronically Supplied Services.

Across various jurisdictions, terminology such as digital services, digital products, and electronic services frequently trigger further discussions. These terms encapsulate the realm and scope of electronically supplied services outlined by the EU VAT Directive, particularly when considering liability matters.

Taxability Rules for ESS

B2B Provision of Electronically Supplied Services – The standard rules for determining the place of supply should be adhered to.

B2C Provision of Electronically Supplied Services – Foreign enterprises are required to implement VAT regulations harmonized across the EU, specifically tailored for this context, wherein the VAT rate of the consumer’s domicile is applied.

Place of Supply Rules for Distance Sales of Goods and B2C Electronic Services Supply – Should the supplier’s annual turnover fall below EUR 10,000, they can abide by the VAT regulations of their home country or opt for the One-Stop Shop (OSS) regulations.

Place of Supply Rules for Distance Sales of Goods and B2C Electronic Services Supply – In cases where the supplier’s annual turnover exceeds the EUR 10,000 threshold, they should levy the VAT rate applicable in the country of dispatch for goods or where the recipient of services is located.

How much is VAT in Germany for Electronically Supplied Services? 
VAT rate Germany: In most instances, electronically Supplied Services are typically subject to the standard VAT rate of 19% in Germany.

E-Commerce VAT Rules in Germany

The E-Commerce package, enacted on July 1, 2021, has been seamlessly integrated into national VAT legislation across Member States.

The legislative modifications within the European Union have substantially transformed electronic commerce operations across Europe. The legislative body’s primary aim was to streamline administrative processes and foster uniformity in regulations governing e-commerce activities within the EU.

These transformations are best illustrated by the broadening scope of transactions governed by EU-harmonized regulations concerning E-commerce.

The EU harmonized provisions from E-Commerce package address the following:

• Remote sales of low-value goods imported in consignments valued below EUR 150 from third countries or territories, conducted by suppliers and deemed suppliers, excluding goods subject to excise duties;
• Intra-community remote sales of goods conducted by suppliers or deemed suppliers;
• Domestic sales of goods by deemed suppliers;
• Provision of B2C services by taxable persons not established within the EU or by those established within the EU but not in the customer’s Member State.

The introduction of the E-Commerce legislative package has significantly modified EU VAT special schemes established under previous legislation.

Existing schemes have been revised, and the Import One-Stop Shop (IOSS) scheme has been introduced, marking a significant evolution in VAT regulations related to e-commerce activities.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes 

The Non-Union Scheme is available for use by:

• Businesses not established within the EU and those lacking fixed establishments within the EU.

Under the Non-Union Scheme, all B2C service supplies falling within the tax jurisdiction of any EU Member State are covered. If a merchant chooses to adopt this scheme, it must apply it uniformly to collect taxes for all B2C sales conducted within the EU.

The Union Scheme is accessible to:

• Taxable entities established within the EU for B2C supply of services where the recipient is based in a different Member State.  The same entities can adhere to this scheme to report the B2C intra-community supply of goods;
• Taxable entities not established within the EU for intra-community remote sales of goods;
• Digital Marketplaces, whether established within the EU or not, for intra-community distance sales of goods and certain domestic goods supplies.

The Import Scheme can be utilized by

• Any taxable entity engaged in remote sales of goods imported from third countries or territories in consignments not exceeding the EUR 150 threshold sold to customers within the EU.

Taxable entities, both established and non-established within the EU, as well as electronic marketplaces, are eligible to utilize this scheme only when the preconditions are met.

OSS Return and Payment

The VAT Germany rules don’t provide a simplified registration process for non-resident economic operators engaged in electronically supplied services or distance sales of goods.

Non-resident businesses can participate in one or more specialized One-Stop Shop (OSS) schemes to fulfill their VAT obligations per German regulations.

However, the benefits of OSS schemes only apply to non-resident businesses supplying goods and/or services from the specific categories outlined in the E-Commerce regulations. 

Any supplies falling outside this designated list or other predefined parameters require non-resident businesses to undergo the local registration process and adhere to domestic VAT regulations.

Electronic Platform and Deemed Supplier Rules

Germany incorporated the harmonized EU VAT provisions into its national legislation, delineating the concept of the deemed supplier and specifying its scope and application.

Under the regulatory framework, a taxable entity facilitating supply through a digital marketplace assumes the role of a deemed supplier upon meeting certain prescribed conditions.

The deemed supplier status is triggered in scenarios involving the supply of goods as follows:

• Importation of goods in consignments from third countries or territories valued below EUR 150, subsequently sold by the underlying supplier to customers within the EU;
• The supply of goods situated within the EU and freely circulating therein are sold by non-EU established underlying suppliers to EU customers, irrespective of the value of the goods.

The deemed supplier VAT provision has introduced new obligations and reshaped the sales process from the underlying supplier to the end customer when facilitated through digital platforms.

Such sales via electronic platforms are divided into two distinct supplies:

• Supply from the underlying supplier to the electronic platform (deemed B2B supply);
• Supply from the electronic platform to the end customer (deemed B2C supply).

In cases where the digital platform assumes the role of the deemed supplier of goods, it is mandated to meticulously record and archive essential VAT data attributable to any other taxable entity, ensuring compliance during audits.

Moreover, digital platform operators must adhere to the record-keeping requisites outlined by the OSS or IOSS scheme. These requisites apply to all taxable suppliers-users of these schemes, and this should guarantee compliance with VAT regulations.

Invoice Requirements in Germany

General invoice information:

• Date of Invoice issuance;
• A unique invoice number issued in sequence in one or more series.

Seller information:

• Business name;
• Full address;
• Tax number (Steuernummer) or – VAT number (Umsatzsteuer-Identifikationsnummer).

Buyer information:

• Business name;
• Full address;
• Tax number (Steuernummer) or – VAT number (Umsatzsteuer-Identifikationsnummer).

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Taxable amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – description;
• Self-billing – description;
• Tax Representative information.

Foreign Currency Invoice in Germany

In Germany, it’s permissible to issue tax invoices in foreign currencies, but the requirements dictate that the total VAT amount and VAT breakdown per rate should be indicated in EUR, as well as the exchange rate and conversion detail in both cases. 

For the conversion rate, the exchange rate published by the Federal Ministry of Finance, valid on the date of supply of goods or performance of services, should be used. Tax authorities can also agree to some extent on the usage of the active exchange rate on the invoice issuance day.

VAT Returns in Germany 

Domestic returns

Taxpayers registered for VAT in Germany should submit, in most cases, monthly or quarterly returns. This is defined based on the turnover made in the previous calendar year.

A small group of taxpayers can benefit from the yearly submission of returns only if their VAT due in the preceding year has been less than EUR 1,000. 

Filling should be made until the 10th of the following month. However, due to the tight deadline for filing and payment, the taxpayer can ask a tax office to extend the submission period permanently. 

If that should be granted, the taxpayer could permanently extend the filing deadline for an additional month. The new filing deadline would be the 10th of the month following the reporting period. 

The payment of owed tax should be made within the same deadlines. 

Penalties for late reporting and omitted declarations

Taxpayers should unequivocally charge Germany VAT on their transactions and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame.  

When taxpayers don’t comply with the VAT Germany rules, the responsible tax authority can impose a fine for non-compliance. 

The exact amount of the final fine for the penalty or penalties in a particular case is pronounced at the sole discretion of the tax inspector. However, there are limits here: 

• A late payment surcharge may not exceed 10 percent of the registered sales tax.
• The maximum limit for a late payment surcharge is 25,000 euros.

Offenders who repeatedly do not file their tax returns and requested documents according to the prescribed deadlines also risk a delay fine. The German tax authorities don’t look with great sympathy to taxpayers who neglect their tax duties, and anyone who continuously breaks the rules can expect heavy fines or even criminal proceedings. 

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