Sales Taxation
Value Added Tax - VAT
Place of Supply - Goods
Place of Supply - Services
Intra-EU Community Trade
Exemptions
VAT Registration
Procedures
VAT Refund
Import Sales Taxation
Value Added Tax - VAT
In Germany, all entrepreneurs who
are engaged and independently
active in a trade, business or
profession with the purpose of
generating income, are liable to
value-added-tax also known as
turnover tax (Umsatzsteuer). The
following information on VAT is a
general overview.
VAT is raised regardless of
citizenship, residence, main place
of management, or the place of
billing or payment. The only
criterion for charging VAT is that
the entrepreneur executes taxable
transactions within the country
above a certain volume. The
German Turnover Tax Law, based
on the EU VAT Directive, covers
the following transactions that are
liable for the German VAT:
The supply of goods and
services within Germany
The importation of goods
from territories outside the
EU into Germany, also
called ''import turnover
tax'' (Einfuhrumsatzsteuer)
The movement of goods
into Germany from
another territory within the
EU (Intra-Community
acquisitions) also called
''acquisition
VAT'' (Erwerbsteuer).
VAT rules distinguish between the
place of supply of goods and
services and define which
transactions are performed for
business and private customers.
The standard VAT rate for the
supplies of goods and services in
Germany is 19 percent. Certain
goods - like books and food - and
services are subject to the lower
rate of 7 percent.
There are some goods and
services that are exempt from VAT.
The most common are intra-EUdeliveries of goods, exports of
goods to a non-EU destination and
services related to these
deliveries.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be found
through the search engine of the
German Association of Tax
Advisors.
Furthermore The German Federal
Central Tax Office maintains a
comprehensive online tax
information center on taxes in
Germany and the taxation
procedure. More information on
the European harmonization
process of the European taxation
systems can be found on the
relevant pages of the European
Commission.
Place of Supply - Goods
The place of supply determines
whether a transaction is subject to
German VAT.
Here are some general rules for
determining the place of supply of
goods for VAT purposes within
Germany:
The place where the
shipping of the goods
begins
The place where the
goods are located at the
time that the buyer
acquires the power to
dispose of the goods
In case of movements
from a special customs
warehouse into free
circulation within the EU:
the location of the goods
when they are put into
free circulation counts as
the place of supply of
goods for VAT purposes.
Imports into EU territory
from non-EU countries:
The place of the
chargeable event for the
supply of goods is the
location where the imports
enter the EU country of
destination and the import
VAT is levied.
Place of Supply - Services
The place of supply determines
whether a transaction is subject to
German VAT.
The place of supply of services
depends on whether they are
rendered to private consumers
(B2C) or to commercial
businesses (B2B). If the recipient
is a private consumer, the place of
supply is where the entrepreneur's
business or permanent
establishment is based. In B2Brelationships, on the other hand,
the place of supply is usually
where the customer's permanent
establishment is located.
Notable exceptions:
Services related to land or
property, VAT liability
exists where the land or
property is located.
Transportation services VAT liability is incurred
where the transport is
performed. Note that
special rules apply in case
of intra-community
transportation.
Work (e.g. valuation,
inspection, repair) carried
out on moveable goods VAT liability exists where
the goods are located at
the time of the work done
(this rule may not apply
where the goods do not
remain in the same
location throughout the
installation work).
Use of patents, copyrights
and trademarks,
advertising, legal, financial
tax, technical and
management consulting
services, use of
information and knowhow, provision of
personnel, leasing of
goods (but not vehicles).
In these cases, the place
of supply is where the
customer is established:
VAT is levied where the
non-EU customer or the
taxable person/entity in a
member state other than
that of the supplier is
established.
Services related to
cultural, artistic, sporting,
scientific, educational,
entertainment, and other
similar activities. VAT is
charged at the place
where the activities
actually take place.
Radio and television
broadcasting services and
telecommunication
services supplied by a
non-EU entrepreneur and
are used and enjoyed
within the EU. In this case
the place of supply is the
place where the services
are effectively used and
enjoyed.
On January 1, 2015 a new EU VAT
place of supply of services rule
was implemented for selling digital
services (telecommunications,
broadcasting, and e-services).
When selling to private customers
within the EU, businesses must
now charge VAT in the EU country
where the customer is located.
This means that the place of
taxation for the supply of
telecommunications, broadcasting,
and electronic services are now
the same for both B2B and B2C
sales.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be found
through the search engine of the
German Association of Tax
Advisors.
Furthermore The German Federal
Central Tax Office maintains a
comprehensive online tax
information center on taxes in
Germany and the taxation
procedure. More information on
the European harmonization
process of the European taxation
systems can be found on the
relevant pages of the European
Commission.
Intra-EU Community Trade
The place of the intra-EU
acquisition of goods is normally
deemed for VAT purposes to be
the place where the goods are
located at the time when the
transport to the person acquiring
them is completed. VAT (in this
case also refered to as acquisition
tax or ''Erwerbsteuer'') is normally
paid by the recipient in the EU
country. The acquisition tax rate is
the same as the VAT rate (19
percent and 7 percent). The
recipient entrepreneur also has the
possibility of deducting the paid
acquisitions tax (input tax) in the
advance VAT return
(Umsatzsteuer-Voranmeldung).
There are numerous exceptions to
the application of this rule. The
most notable exceptions are: the
recipient is VAT registered with a
VAT identification number in the
EU country of destination or the
supplier does not hold adequate
proof of the shipment of goods. In
such cases, VAT is payable by the
supplier in the EU country from
which the goods are dispatched.
When the goods are moved from
Germany to another EU country
without any change in legal or/and
economic ownership, German VAT
is due unless proof of shipment is
provided and the German
entrepreneur is registered for VAT
in the country of destination. This
rule will apply even if the goods
only remain in the ownership of the
German entrepreneur for a short
period of time in the country of
destination and are destined for
sale to a single customer in that
country (i.e. consignment stock).
Exemptions
The German Value Added Tax Act
provides tax exemptions for
Small enterprises whose
total turnover during the
past year was below
17,500 € and whose
turnover presumably will
not exceed 50,000 € as
provided in Sec. 19 of the
VAT Act.
Specific kinds of service
listed in Sec. 4 of the VAT
Act like exports, bordercrossing shipments within
the European Single
Market
Specific Service Sectors
like health services,
education services,
financial services, real
estate dealing, and
voluntary services to
name a few
However, According to Section 9 of
the VAT Act taxpayers may
optionally pay VAT even for
exempt turnover, in order to deduct
input taxes, as this sometimes
might be more profitable.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be found
through the search engine of the
German Association of Tax
Advisors.
VAT Registration
A German entrepreneur receives
upon registration of a business a
single tax reference number for all
applicable taxes, including VAT.
Entrepreneurs who intend to
supply goods or services within the
Single European Market have to
apply for a separate VAT
identification number. This
identification number is
standardized within the European
Union and has to be quoted on
invoices received and issued in
relation to all intra-EU supplies of
goods. The validity of VAT
numbers can be checked at the
VIES (VAT Information Exchange
System) web page. The VIES
might also help to find verify the
entries name and address of the
seller.
Foreign companies that are not
established in Germany may also
register for VAT without having to
form a local company. A VAT
number must be in place before
the foreign company can start
carrying out its business in
Germany.
Registering for German VAT may
take at least three weeks, although
this can vary. In order to receive a
general tax reference number the
foreign enterprise/entrepreneur
must register with the tax office
(Finanzamt) allocated to his
country within Germany. The VAT
identification number is also
available through an online
application procedure which may
be accessed through the website
of the Federal Tax Office.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be found
through the search engine of the
German Association of Tax
Advisors.
Procedures
VAT has to be paid quarterly in
advance. Within 10 days after the
end of a quarter the VAT tax
return has to be calculated and
handed over electronically to the
local tax office. Enterprises whose
VAT liability exceeded 7500 €
during the preceding year have to
file the tax return every month
instead. Within another ten days
the VAT has to be paid. An
additional VAT tax return is due at
the end of each year.
In principle, the provider of goods
or services is liable for the
payment of sales taxes. However,
special regulations apply to B2Bcontracts with foreign service
providers that are not permanently
established in Germany. In this
case, VAT needs to be paid
through a reverse charge
procedure, i.e., the German
service recipient is the tax debtor.
Within the Single European Market
sales to Germany can be
exempted from value added tax
(VAT) in the country of origin.
Suppliers from EU member states
are able to declare sales to
Germany in the recapitulative
statement (''zusammenfassende
Meldung'') and acquit themselves
of the VAT. The recapitulative
statement form is supposed to be
provided by the national tax
authorities. In this form, vendors
have to identify customers by
quoting their VAT registration
number, which should be
exchanged upon conclusion of the
transaction.
In order to quantify the trade
volume within the Single European
Market, European statistics offices
have established the Intrastat
system. Every vendor or buyer
who realizes an annual trade
volume of more than 400,000 Euro
must report the turnover to the
corresponding office for national
statistics in his/her home country.
Such data is used to calculate
GDP- and foreign trade figures.
For more information, please
contact the relevant authorities in
your country.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be
found through the search engine of
the German Association of Tax
Advisors.
VAT Refund
Foreign companies that are not
registered in Germany and do not
generate turnover that is liable to
German VAT are eligible to apply
for a VAT refund.
According to the new EU Directive
2008/9/EC which came into effect
on January 1, 2010, enterprises
registered in other EU member
states must apply for a VAT refund
at their local tax administration
offices and follow the refund
procedures required in their home
country.
Businesses from outside the
European Union need to send their
VAT refund application and the
relevant attachments to the
competent German Tax Office. It is
recommended to apply online in
order to accelerate the process.
The Federal Central Tax Office
(FCTO) provides detailed
information on the refund
procedures and offers additional
support on its Tax Information
Center website.
Private individuals only may
request VAT refunds, if they
purchase goods in Germany to
take to a non-EU country. The
German Customs Office is
generally responsible for the
refund procedures relating to
private persons.
Since VAT is a very complex
subject and there are many
different cases and exceptions, it
is recommended that all trading
companies seek competent advice
in this area, to make sure that they
are fully informed about the taxes
that apply to their products. A
suitable tax advisor might be found
through the search engine of the
German Association of Tax
Advisors.
VAT-Refund for Foreign
Exhibitors
Foreign companies seeking to
exhibit their products and services
in a trade fair in Germany have the
possibility to apply for a VAT
refund depending on the country
where their business is
established. As stated above, VAT
will be refunded to companies from
other EU-Member States.
Entrepreneurs from non-EU states
are only entitled to a VAT refund if
no VAT or similar tax is raised in
their home country or if the foreign
government has signed a
reciprocity agreement with
Germany.
In general, expenses are refunded
for:
Trade fair expenses
(exhibition booth rental,
assembly, construction,
etc.)
Accommodation and
travel expenses (hotel,
taxi, food, parking fees,
etc.)
Expenses incurred while
visiting customers in
Germany
Service costs
(interpreters, advertising,
catering, etc.)
All invoices must be collected and
submitted to the Federal Central
Tax Office with a formal request for
a VAT refund. The procedure is
called ''input tax refund
procedure'' (in German: VorsteuerVergütungsverfahren). You can
also contact a VAT service
company to have the paperwork
done. Some German trade fair
companies offer this service for a
fee. Be aware that the VAT refund
application must be received by
the Federal Central Tax Office by
June 30th of the year following the
purchase.
Import Sales Taxation
Goods coming from non-European
countries into Germany are subject
to an ''import turnover
tax'' (Einfuhrumsatzsteuer) of 19
percent. It is equivalent to the
value-added tax (Mehrwertsteuer)
which is levied on all domestically
sold items placing the same tax
burden on imported and domestic
products. The import turnover tax
is charged on the customs
valuation on the imported good
plus a customs duty. A discounted
tax of 7 percent is levied on food
products, books, newspapers,
pieces of art etc.
Importers can deduct this import
tax as input tax (Vorsteuer) from
their value-added tax bill, if the
goods have been acquired for
resale purposes. In order to do
this, the company must be able to
provide the necessary import
documents (import declaration).
The German customs authorities
collect both customs duty and
import turnover tax. Further
information on the import turnover
tax is available on the website of
the German Customs Office.
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