German Value Added Tax (VAT) is a significant tax system that exerts a broad impact on businesses and consumers operating in Germany.

As an accounting firm, we are well aware that businesses planning to operate or invest in Germany must understand and comply with this tax policy to ensure financial compliance.

If your company is planning to or already engaging in transactions in Germany, you may need to pay attention to more details.

VAT in Germany

The German VAT system was first introduced in 1968 and remains in effect today.

The current standard VAT rate is 19%, in line with the European Union’s standard rate.

However, there are also special reduced rates (7%) and exempt categories (0%).

Furthermore, the German VAT system is relatively friendlier to small businesses, particularly in terms of simplified reporting procedures.

If you plan to sell goods or provide services in Germany, you might need to determine whether VAT registration is required.

VAT
VAT

VAT Registration in Germany

For businesses located outside of Germany, VAT registration is necessary to conduct transactions in Germany.

For remote sellers, such as internet retailers, VAT registration is required if your annual turnover reaches €100,000 or more.

Additionally, the following circumstances may also necessitate VAT registration:

  • Importing goods into Germany
  • Transporting your goods within Germany and between EU member states
  • Engaging in commodity trading in Germany
  • Storing goods in Germany (warehousing)

Step 1 - Confirm

Confirm whether your business needs to register for VAT, and ensure you apply for registration before engaging in transactions to avoid penalties.

Step 2 - Local Fiscal Representative

Find a local fiscal representative (only for non-European companies), which can be a local company representing your business to report to tax authorities and handle VAT-related matters.

Step 3 - Submit Application

Register for VAT and submit required documents, including a copy of the articles of association……

 

Step 4 - Waiting for VAT number

Typically, it takes about a month for the application to be processed. Due to system reasons, it currently takes about 4-5 months to obtain a VAT number.

Step 5 - VAT Obligations

Fulfill your domestic tax obligations and submit VAT returns as required.

Submitting VAT Returns

Once you have obtained your VAT number, it’s essential to regularly submit returns to avoid further complications.

The frequency of VAT returns in Germany usually depends on your company’s sales:

  • Annual returns for annual turnover less than €1,000
  • Quarterly returns for annual turnover between €1,000 and €7,500
  • Monthly returns for annual turnover exceeding €7,500
VAT

Need Assistance?

Given the various circumstances of different businesses, you may have additional questions and concerns.

Our international team includes German tax experts who provide free consultation and solutions.

For all matters related to German Value Added Tax, you can entrust them to us.

If you are a non-European Union business, we can also serve as your local fiscal representative to handle all matters.

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