The value added tax (VAT) is an indirect tax applied for the production of goods and rendered services to an end user. The German value added tax (Umsatzsteuer) is paid by companies after being levied on the consumers buying the respective products or services. The current standard VAT rate in Germany is 19% and it was introduced in 2007. Compared to other EU countries, the German VAT is below the average. The tax authorities also impose a reduced VAT rate of 7% on certain items. Among the products benefitting from the 7% tax rate are foodstuff, magazines and books. Imports are also subject to the VAT in Germany.
Foreign entreprisers interested in starting a company in Germany must comply with the VAT system in this country.
All German companies are required to submit a monthly VAT tax report with the local authorities. Under certain conditions VAT reports and payment may be submitted in advance. However, there are also circumstances under which German companies are not required to pay the value added tax. Companies with an annual turnover below 512 euros may be exempt from paying the German VAT. Companies not exceeding an annual income of 50,000 euros are not required to pay the VAT. Other VAT exemptions apply to:
Our specialists in company formation in Germany can provide you with more information about VAT exemptions.
German companies are required to register for VAT before starting operating. The German tax authorities will issue a fiscal registration number for the company which will also be used when applying for tax returns. Companies involved in export activities will also be required to apply for a VAT identification number. Foreign companies operating in Germany are subject to the same VAT requirements as local ones. Also, registration for VAT in Germany allows foreign operators to apply for tax returns.
Non-taxable companies and micro-enterprises are not required to register for VAT in Germany. Business entities with an annual return of 12,500 euros maximum are among these entities.
If you need details about the country’s taxation system or need accounting services or complete assistance in starting a company in Germany you can rely on our German consultants in company registration. You can also contact us if you need other corporate services, such as: virtual office services or ready-made companies.