You may be confused by VAT (Umsatzsteuer) in Germany: how it works? should I charge VAT? Should I pay to the Finanzamt?
In the article below we explain the basics of VAT.
🇩🇪 For sales in Germany, you charge 19% VAT to your clients. This VAT has to be paid to Finanzamt every tax period (month or quarter or year depending on your status).
🇪🇺 For B2B sales outside Germany and within the EU, you charge 0% VAT under the reverse charge regime. Your client declares and pay the VAT in his country. You need a VAT-ID to create an invoice. If you don't have one yet, you can request a VAT-ID through an online form directly on the Finanzamt website. See this page to know more.
🇪🇺 For B2C sales in other EU countries, you must charge VAT. To avoid complexity, you are allowed to charge 19% German VAT if your sales in that country are below 10,000€ per year. If it's above 10,000 €, you must declare it using the EU's "Mini One Stop Shop". This avoids you the complexity of having to do full VAT declarations in many countries where you have sales, but not real operations.
🌍 For B2B sales outside the EU, 0% VAT applies because it's an export outside of the EU
🇩🇪 From providers in Germany, they charge you 19% VAT. You deduct this VAT every tax period (month or quarter or year depending on your status).
🇪🇺 From providers outside Germany and within the EU, they charge 0% VAT under the reverse charge regime. You declare this VAT in Germany (you paid 0€ and deduct 0€, so no impact on your VAT amounts, but the Finanzamt car reconcile intra-EU transactions and cross-references this with your ZM). You need to communicate your European VAT-ID to your provider so they can invoice you correctly.
🇪🇺 When you make purchases in EU while traveling for example, you may pay local VAT (e.g. a stay in a hotel in France for a business trip, you would be charges 20% VAT). This VAT is not recoverable on your VAT return. You will be able to deduct the full expense amount for your income tax.
🌍 From providers outside of the EU, there is no VAT. You may pay local taxes in some cases, which is not deductible on your VAT return.
🌍 When you make purchase of goods outside of the EU (e.g. you purchase an e-bike from Alibaba), you will be charged import tax by the transport company at the customs.
Each tax period, you will submit a report to the Finanzamt (the VAT-presubmission).
This report computes the balance between the VAT you have collected from sales, minus the VAT you have spent from deductible business purchases
If you have collected more than spent, you will pay the difference to the Finanzamt
If you have collected less than spent, the Finanzamt will refund you the difference.
💡 Want to find out more? In our free webinar, Be your own boss, we explain step by step how to get started as a self-employed person in Germany – including registration, tax obligations and a live Q&A session. Register here!
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Author - Sophia Merzbach
Sophia has been a key member of the Accountable team for many years, bringing a unique blend of journalistic precision and in-depth tax expertise to her work.
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