VAT in Germany: Process, German VAT Rates, Due Dates

Germany is with one of the biggest Amazon marketplaces in Europe definitely worth expanding to. This is likely to require a VAT registration in Germany. The VAT rates that apply differ within Europe from country to country and the product category is also decisive. 

How does VAT work in Germany?

The VAT applies almost to all goods and services that are bought and sold within the EU. Therefore, export goods which are sold abroad are normally not subject to VAT. The other way around, imports are taxed to guarantee an equal competition – on equal terms on the European market with suppliers situated outside the EU.

Germany, like any other country that is part of the EU, can set its own standard VAT rate as long as it exceeds 15%. In Germany the standard rate is 19%.

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German VAT rates – depending on the product

The standard VAT rate, as mentioned before, is 19%, however, there are specific types of goods for which different rates apply.

Value Added Tax rate in Germany – 19% (Standard):

The standard VAT rate in Germany is 19%, as mentioned above. All products that do not explicitly fall under the reduced tax rates of 7% or 0% are taxed accordingly at 19%. 

VAT rate: 7% (Reduced):

The reduced German VAT rate is 7%. The following product or service categories are taxed at this 7% rate:

• water supplies
• medical equipment for disabled persons
• local public transport
• books, audiobooks and newspapers
• periodicals
• writers / composers
• agricultural inputs
• hotel accommodation
• admission to cultural and certain sports events
• social services
• firewood
• take away
• medical and dental care
• cut flowers and plants
• taxation of gold and jewellery

Rate of 0% (Zero) in Germany

Intra-community and international transport are subject to a tax rate of 0%.

Formulas for calculating the german tax rate

In order to actively use VAT, we have listed below the different formulas for calculating gross and net prices. 

Calculate included VAT 19%: gross price / 1.19 * 0,19 = included VAT

Calculate included VAT 7%: gross price / 1.07 * 0,07 = included VAT

Calculate price without tax 19%: gross price / 1.19 = net price (without VAT)

Calculate price without tax 7%: gross price / 1.07 = net price (without VAT)

Calculate price with VAT 19%: net price * 1.19 = gross price (incl. VAT)

Calculate price with VAT 7%: net price * 1.07 = gross price (incl. VAT.)

To use formulas would be the analog way. Another one is to use digital tools. For this purpose there are so-called value added tax calculators, which you can find online. 

When prices are calculated, this is often first done with net values. The price you have calculated is the price you want to receive for your product or service. Now you add another 19% sales tax to your target price. Sounds simple? It is! 

Calculate price with VAT 19%: net price * 1.19 = gross price (incl. VAT)

Calculate price with VAT 7%: net price * 1.07 = gross price (incl. VAT.)

Nothing in life is safe, right? Unfortunately it is: You have to pay taxes, the tax office is rightly strict. But here’s some good news: As an entrepreneur, you don’t pay sales tax on business expenses. You only collect it for the state and finally pay it to the tax office. An honorable task – after all, you will get the sales tax back afterwards.

Periods for VAT return in Germany

Basically, the deadlines for the advance return for sales tax depend on the turnover you have generated and are set by the tax office. Three different periods are possible. 

• Every month: If your previous year’s sales tax liability was more than 7.500,- EUR, your advance sales tax returns must be submitted monthly in the following year. 
• Every quarter: If your sales tax liability was between 1.000,- EUR and 7.500,- EUR in the previous year, you have to submit your sales tax advance returns quarterly in the following year.
• Every year: If your sales tax payment load was even lower than 1,000 EUR in the previous year, the tax office can exempt you from the obligation to submit an advance sales tax return. So you only have to pay your taxes once a year. 

If no previous year’s figures are available, because the company is a start-up, for example, you must estimate your sales volume. On the basis of this estimate, the tax office will determine the frequency with which your advance return for sales tax must be submitted.

Basically: You are not allowed to adjust the time periods on your own if you exceed or fall below the above mentioned limits. The tax office will inform you independently if the tax periods change and only from this point on you are obligated to the new regulation. 

VAT in Germany: Due date

Now that you know for which periods you have to submit your VAT returns, we can see when you have to submit them. This again depends on whether you submit them monthly, quarterly or annually. 

Monthly turnover tax advance return: Submission until when?

If the tax office has determined a monthly tax for the advance return, you must submit this to the appropriate authority on the 10th of the following month. If you want to submit the VAT return for January, you must send it by February 10th at the latest. If the 10th falls on a Saturday, Sunday or public holiday, the deadline is postponed to the next working day. 

Submit a quarterly advance return for sales tax: Dates for submission

If you have to submit your advance VAT returns quarterly, the principle is similar to that of the monthly rhythm’. They must be submitted on the 10th of the month following the accounting period. Meaning: If you want to submit your VAT return for the first quarter (January to March), the latest deadline is April 10th, if it is a working day – otherwise the next working day.

Deadline for the annual turnover tax advance return or annual turnover tax return

Attention: As already mentioned, you only have to pay your sales tax once a year if your sales tax payment load was less than 1.000,- EUR in the previous year. However, this means that the tax office exempts you completely from the advance return. Accordingly, you do not have to submit a VAT advance return or pay a VAT advance payment. 

In this case, the annual VAT return must be submitted only once a year. The deadline for the annual return is 31 July of the following year. For 2019, you must therefore submit your annual VAT return by 31 July 2020.

UK to Germany: Note delivery thresholds

In Europe there is not the one delivery threshold. Depending on the nation, the height of the delivery threshold varies and it is important to know how high it is where. The basis for reaching the delivery threshold is the annual net turnover that the dealer achieves with sales to the respective country. As long as the net sales to the country concerned are below the delivery threshold at the end of the year, the dealer pays tax on his sales in his own country. However, as soon as the delivery threshold is reached or exceeded exactly, the dealer must register for sales tax there.

In addition, in the future he will have to pass on e.g. advance VAT returns or tax returns to the tax offices concerned. Anyone who fails to do so, whether consciously or unconsciously, can expect severe penalties.

Delivery threshold in Germany

In case you are a dealer outside of Germany, the German delivery threshold is relevant for you. As long as you generate five-figure sales to customers in Germany, you will be taxed as usual in your country. However, as soon as you reach the magic threshold of 100,000 € and thus six-figure amounts, you have to register for sales tax in Germany. This corresponds to approximately £90,200. 

Beside the value added tax registration now likewise advance notifications, regular tax declaration and further are necessary, in order to be allowed to act here further legally. Failure to complete these tasks may result in penalties. 

German exports to UK

Although the United Kingdom officially left the European Union on February 1, 2020, it will remain in the EU single market and the EU customs union until December 31, 2020. It is also possible that this period will be extended by another two years. Until then, this means only good news for traders from Germany. When shipping products to England, they will only pay VAT – and no import tax. In addition, they usually do not have to enclose customs declarations with their shipments. 

Here and there there are still points that you should consider when sending goods to the United Kingdom. After all, you need to be sure that your shipments will arrive on time and undamaged. 

Summary

Due to the EU-wide meanwhile largely uniform regulations, German tax law does not present you with a particular challenge. Nevertheless, it is important to know the rules and regulations in order to be able to act in accordance with the law. Especially the deadlines you should definitely keep before penalties or accusations of tax evasion occur