What does this guide contain?
The guide provides you with practical VAT information for Germany:
- Your VAT registration in Germany
- Your VAT obligations TVA in Germany
- The invoicing rules in Germany
VAT REGISTRATION IN GERMANY
When do you have to register for VAT?
It is mandatory for your company to apply for VAT registration with the German tax authorities before starting your activities. Financial penalties may apply if the application for registration is submitted late.
What documents do I need to provide when I register?
If your company wishes to register for VAT in Germany, it is essential to contact the German tax authorities. There is no need to contact the tax authorities in your country of establishment.
In particular, your company will need to submit the following documents:
- The VAT registration form(s) completed in the language of the country
- A copy of the articles of association
- An extract from the trade register
- A certificate of VAT liability
- Power of attorney (if using a fiscal agent)
- Proof of activity on the territory of the country concerned: a contract, an order form, etc.
The German tax authorities may require some of these documents to be translated into German.
How long does it take to get a VAT number?
If your file is complete, it generally takes one month to obtain the VAT number from the competent German tax office.
Is a fiscal representative necessary?
German VAT authorities may require non-European companies to appoint a fiscal representative. They have to do it through a VAT representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.
European companies are not obliged to appoint a VAT representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder (agent) to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.
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VAT OBLIGATIONS IN GERMANY
Is it necessary to keep VAT accounting ledgers?
Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the German tax authorities.
When do you have to file a VAT return?
Your company has to report its VAT position by filing preliminary VAT returns on a monthly basis where [net] VAT due in previous calendar year exceeds the amount of € 7.500 [and also within the first two years for newly incorporated companies]. Preliminary VAT return has to be filed quarterly if [net] VAT due in previous calendar year is lower than € 7.500. If the net VAT due in the previous calendar year did not exceed € 1.000, no preliminary VAT returns have to be filed but only the annual VAT return.
The VAT return must be filed electronically by the 10th day of the month following the end of the taxable period. It is possible to apply for a permanent time prolongation of one month which requires a special prepayment. The amount is calculated as 1/11 of the VAT due in the previous year and is set off against the VAT liability of December.
The VAT expert's eye
Member States set the duration of the taxable period at one, two or three months. However, they may set different periods provided they do not exceed one year. The VAT return must be submitted within a period to be determined by the Member States. This deadline may not be more than two months after the end of each taxable period (Art. 250 of the VAT Directive).
Do I have to submit an annual return?
Your company has to file an annual summary return [Umsatzsteuererklärung] in Germany. The Statement should be filed by electronic means before May 31st of the next calendar year. As from 2018, this deadline will be extended to July 31st of the following year (i.e. the annual VAT return for 2021 will have to be filed by July 31st 2022) . A filing extension [up to December 31st] can be obtained upon request.
The VAT expert's eye
Member States may require the taxable person to file a return containing all the data referred to in Articles 250 and 251 and concerning all transactions carried out during the previous year. This return shall include all the information necessary for any adjustments. They authorize, and may require, the return to be made by electronic means under conditions which they determine (Art. 261 of the VAT Directive).
What is the deadline for paying German VAT?
The company must pay the VAT due no later than the 10th day of the month following the taxable period.
If the tax due on the basis of the annual VAT return exceeds the interim payments or no provisional returns were submitted, the balance due must be paid within one month following submission of the annual VAT return to the tax office. Late payment causes surcharges of 1% of the net tax payable.
The payment made on the basis of the monthly or quarterly provisonal returns are actually interim payments.
The VAT expert's eye
Every taxable person who is liable for the tax must pay the net amount of VAT when filing the VAT return. Every taxable person who is liable for the tax must pay the net amount of VAT when submitting the VAT return. However, Member States may set a different deadline for the payment of this amount or collect instalments (Art. 206 of the VAT Directive).
When should the intra-EU statement be filed?
The recapitulative Statement [ESL] must be filed on a quarterly basis provided the intra-Community of goods do not exceed € 50.000 in the current calendar quarter and the past four calendar quarters. If the above threshold is exceeded, the Statement must be filed on a monthly basis.
The Statement must be filed by the 25th of the month following reporting period [month/quarter].
The eye of the VAT expert
A recapitulative statement is drawn up for each calendar quarter within a period and according to procedures to be determined by the Member States. However, Member States may provide for recapitulative statements to be submitted on a monthly basis. Member States may allow, and may require, recapitulative statements to be submitted electronically under the conditions they determine (Art. 263 of the VAT Directive).
INVOICING RULES IN GERMANY
Does the invoice have to include VAT? Reverse Charge?
As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.
The special reverse charge rules have been introduced in German for foreign companies:
For supplies of goods:
Reverse charge mechanism is not applicable to major domestic supplies of goods (except for specific supplies of goods with installation and some other specific items).
The reverse charge applies to work supplies (“Werklieferungen”). According to the German Tax Authorities, a work supply means that the supplier processes goods which do not belong to him and also uses goods procured by himself for this purpose.
If the supplier only processes his own goods, the operation rather qualifies an assembly delivery (“Montagelieferung”) and the reverse charge does not apply.
For supplies of services:
Reverse charge mechanism is applicable to major domestic supplies of services (except for admission to trade fairs, exhibitions and conferences and other specific items).
The eye of the VAT expert
Reverse charge on supplies with installation - Be careful !
In Germany, the reverse charge mechanism applies to work supplies by a non-established taxable person to another taxable person, even if that operation actually qualifies as a supply of goods from a German VAT perspective. There is however a distinction to be made between such work supplies (“Werklieferungen”) and assembly deliveries (“Montagelieferungen”), although both operations include an installation and are therefore deemed to take place in Germany from a VAT perspective.
On October 1st, 2020, the German Authorities issued clarifications in that respect, implying clearer definitions of these concepts.
What are the mandatory mentions on an invoice?
The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.
What VAT rate should be mentioned on an invoice?
Germany has 2 differents VAT rates :
- Standard rate : 19%
- Reduce rate: 7%
VAT REFUNDS IN GERMANY
How can I recover VAT in Germany?
There are several methods to obtain refunds of German VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Germany:
- If your company has a VAT number in Germany, it will have to submit a refund application in the form and within the timeframe required by local regulations. Any VAT credit cannot be carried forward. Refund is done immediately [generally within one month from the deadline for submission of the annual VAT return].
- If your company is established in a European country and does not have a VAT number in Germany, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.The refund that is applied for must be at least € 400. The refund that is applied for must be at least € 50 for refund periods that include the calendar year or the last period of the calendar year. Refund periods must include at least three consecutive calendar months in a calendar year. They may not exceed one calendar year. The period can be less than three months if the period is the remaining period of a calendar year. The periods of applications may not overlap. Exception: If you have submitted a refund application for the calendar year or for the last period of the calendar year, you can submit one other refund application for that calendar year. The only VAT amounts that can be included in this application are VAT amounts that are not included in past refund applications that were effectively submitted
- If your company is established outside Europe and does not have a VAT number in Germany, it will have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.
The VAT expert's eye
If you have submitted an invoice that does not meet the regulations of Sec. 14 Par. 4 Umsatzsteuergesetz (i.e. VAT Act), and VAT is therefore not refundable, you have the possibility to have the invoice corrected by the invoice issuer and to reclaim the VAT from the corrected invoice.
Is German VAT recoverable on all expenses?
VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.
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