In Germany value-added tax is applied to the supply of goods and services. Companies are required to add VAT to their prices, and therefore this specifc tax will be paid by the end user of the product or service. There are also transactions such as compensation payments that are not subject to VAT payment.
The German VAT standard rate is 19 % but there is also a reduced rate of 7 % for goods and services like: food, plants, and animals, books and newspapers, works of art, or entrance fees to cultural sites.
Certain goods and services are exempt from value-added tax in Germany; this applies for German and foreign businesses alike. The following are exempt from German VAT: export deliveries, intra-community supply of goods, services provided by professional groups, financial services, cultural services, voluntary services.
Companies are not forced to register for VAT in Germany but need to register for VAT payment if they make taxable supplies. In order to do that, companies need to fill in an application, add a registration certificate and provide information about the directors, the form of organization of the company, the company’s activity and expected turnover. Once all the information is submitted the companies will receive a fiscal registration number. This applies also for companies that manage intra-community supplies in Germany.
Small entrepreneurs and non-taxable legal entities are not required to submit VAT in Germany, thus they are not liable for it.
The registration rules applied to German companies also apply to non-German companies providing taxable supplies within the country. However, the small entrepreneurs’ exemption does not apply to non-resident taxpayers.
If you are looking to open a business in Germany our German law firm will provide you with the best personalized offer.
VAT recovery in Germany is possible if companies do not have domicile, registered offices, management or permanent establishment in Germany. In order to benefit from VAT refunds, the companies need to submit an application form together with a list of invoices to the local tax authorities, but it can also be submitted electronically by September 30th of the year following the refund period. The minimum amount to be refunded for one year is 25 euros. VAT will not be refunded for goods or services used for personal purposes.
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