VAT in the Federal Republic of Germany

Germany is a member of the European Union (EU) and draws up its tax rules according to the laws or directives issued from Brussels by the EU. The current VAT directive applies to all 27 member states of the European Union, and it governs the rules on VAT compliance, and in some part, covers the setting of VAT rates.

As an EU member state, Germany is obliged to implement the VAT directives, which provides guidance on VAT. Where there is a conflict, the European Union’s directive takes precedence. Germany is a member of the European single market economy and uses the Euro (€) as its currency. In Germany VAT is known as: Umsatzsteuergesetz, or UStG.

VAT registration in Germany

Both EU and non-EU businesses may trade in Germany without establishing a local presence. This is known as non-resident VAT trading. There is no VAT threshold in Germany for the registration of non-resident traders, but you will need one to record transactions and your German customers will want proof that you have obtained one.

There are strict rules on the situations where VAT registration is permitted. Common scenarios that require German VAT registration include:

• Importing goods into Germany;
• Organising live events, conferences, etc. in Germany;
• Holding goods in a warehouse in Germany as stock for resale;
• Buying goods within Germany that are subsequently re-sold in-country;
• Selling goods from Germany to other EU member states;
• Distance-selling to private individuals in Germany, e.g. internet retailing or trading through an e-commerce platform.

Registering for German VAT can take up to six weeks once all documentation has been submitted to the tax authority, but this varies from seller to seller and will depend on the specifics of an individual company.

German VAT compliance

There are detailed rules controlling the recording and processing of German transactions for VAT purposes. This includes guidelines on:

• German invoice requirements;
• When to issue a German tax invoice;
• Foreign currency reporting;
• Credit notes and corrections;
• Correcting entries from prior returns;
• Which accounting records must be maintained.

German VAT rates