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What VAT applies in Germany?

Publication date: 09.10.2020

VAT (value-added tax) in the local language is “Mehrwertsteuer,” and the acronym VAT is translated as “MWSt.” Find out what are the VAT rates in Germany and when the obligation to register VAT in Germany arises. What to pay attention to? Are there lower VAT rates in Germany than in Poland?

VAT Germany

VAT rates in Germany

VAT in Germany has been in force since 1968. There are three VAT rates in Germany. The basic rate of the German Umsatzsteuer (VAT) is 19% and applies to most goods for which no reduced rates apply – 7% and 0%. However, due to the COVID-19 pandemic, the German government decreased the VAT rates to 16% (from 19%) and 5% (from 7%), which are currently in force until 31 December 2020.

 

VAT rateIndicated goods or services
19%All goods or services other than those indicated below
7%Certain foodstuffs and their supply, Milk and certain milk products, Water supply (excluding bottled water), Medical equipment for the disabled, Certain domestic passenger transport, Intra-Community and international passenger transport for certain road, rail and inland waterway transport (up to 50 km), Books (excluding books the content of which is harmful to minors), E-books, Audiobooks, Newspapers and magazines (except those that contain content harmful to minors and advertisements of more than 50%), Admission to cultural events, Hotel accommodation (short-term accommodation only), Certain entries to sports events, Social Services, Medical and dental care, Fireplace wood, Cut flowers and plants for decorative use and food production, Taxation of certain gold coins and jewellery, Delivery of food products
0%Intra-Community and international transport (excluding road and rail transport and certain inland waterways)

Steuernummer and USt-IdNr

In Poland, each company receives a tax identification number (NIP), which is used for VAT settlements with the tax office. In the case of intra-community transactions, the entrepreneur applies for VAT-EU registration. The VAT-EU number is the NIP number with a prefix PL – e.g. PL1234567890. The tax identification number in Germany is divided into Steuernummer and USt-IdNr (Umsatzsteuer – Identifikationsnummer).

The Steuernummer is needed for transactions with German companies and indexation at the tax office. This is equivalent to the Polish NIP number.

Umsatzsteuer – Identifikationsnummer (USt-IdNr), on the other hand, is required for intra-community transactions – the equivalent of the Polish VAT-EU number and commonly called the VAT DE number. It is a 9-digit number which follows the prefix DE. It is necessary for entrepreneurs who supply and purchase intra-Community goods to provide services for which the recipient has to pay tax or use services of companies from other countries—the application for the USt-IdNr. The number must be submitted when applying for VAT registration in Germany.

So everyone will have a Steuernummer, the same as the NIP number in Poland. However, USt-IdNr (VAT DE), just like VAT-EU in Poland, is issued if you apply for it. Merchants on Amazon or eBay platforms will additionally need the so-called 22FCertificate to confirm VAT registration in Germany.

German VAT invoice requirements Invoices

Invoices should contain the following basic information:

  • Date of issue of the invoice
  • Unique number
  • Full supplier and customer addresses
  • Supplier’s VAT number
  • Full description of services or goods supplied
  • Details of the quantity of goods
  • Date of delivery (if different from the invoice date)
  • The net value of the supply subject to taxation
  • Applied VAT rate
  • VAT amount
  • Details supporting zero VAT
  • Total gross invoice value

When should I register for VAT in Germany?

The obligation to register for VAT in Germany results from the foreign entity’s obligation to settle German VAT.

The settlement of VAT in Germany by foreign entities is linked to the amount of annual distance selling to Germany. If an entrepreneur exceeds the revenue of EUR 10,000 as a result of distance selling to customers in Germany, they are obliged to account for VAT in Germany or use the procedure VAT-OSS.

The VAT is settled monthly, quarterly or annually. The German tax office decides which settlement period is to be applied by the entrepreneur taking into account the revenues from the previous year. If the entrepreneur did not exceed EUR 7,500 in the previous year, they can submit the returns quarterly.

In the case of monthly and quarterly settlements, an annual declaration is also required. In Germany, the intra-community transaction summaries (ZM-Meldung, translated into Polish by WDT/WNT) are submitted monthly until the 25th day of the following month. The monthly VAT return must be submitted by the 10th day of the following month and the quarterly one by the 10th day of the month following the tax period. The annual VAT return in Germany should be submitted by July 31 of the year following the tax year.

In addition, the entrepreneur should register for VAT in Germany if their company:

  • Delivers goods from Germany
  • Imports goods with customs clearance in Germany
  • Deals with the transport of people through Germany
  • Provides real estate services in Germany, including construction services

Germany – distance selling threshold

The distance selling threshold for taxpayers in Germany is EUR 10,000.

On the 1st of July 2021, with the introduction of the VAT-OSS procedure, distance sales thresholds to EU countries were modified. Must read what is VAT-OSS? Changes to VAT settlements in the EU for online retailers.

Penalties and VAT interest in Germany

Failure to settle the VAT on time may result in interest or penalties being imposed by the German tax office. For late payment, interest amounting to 1% of the required tax may be charged. The maximum amount of interest can be EUR 25,000.

The imposition of penalties for failure to submit a return on time depends to a large extent on the will of the tax office and the situation of the taxpayer. Justification for a one-off delay is something that can have a positive impact on the office’s decision and not to impose a penalty, while frequent delays will have a negative impact. The penalty imposed is usually between EUR 100 and EUR 500.

Intrastat in Germany

In addition to the VAT declaration, foreign companies operating in Germany may be required to report Intrastat statistics. This includes information on the import or export of goods between countries belonging to the European Community, as well as the movement of own goods to a warehouse located in another Member State.

The import threshold is EUR 800,000. The threshold for export is EUR 500,000. The monthly Intrastat report should be submitted by the 10th day of the following month.

Tax Office – Finanzamt

Due to the close business relations between Poland and Germany, a very large number of Polish companies are obliged to register and settle VAT in Germany. For this reason, 4 tax offices have been dedicated to serve Polish companies.

  1. Tax Office in Noerdlingen – if the name of the entrepreneur, the name of the civil partnership or legal person begins with the letter S
  2. Hameln Tax Office – if the name of the entrepreneur, civil partnership or legal entity starts with letters A to G
  3. Tax Office in Oranienburg – if the name of the entrepreneur, the name of the civil partnership or legal person starts with the letters H to L,
  4. Cottbus Tax Office – if the name of the entrepreneur, civil partnership or legal entity starts with the letters H to L

Do you want to register for VAT in Germany? >> Contact us

Adam Grabiński