VAT in Germany: Complete Guide

• Standard VAT: 19%, the standard VAT rate applied to most goods and services.
• Reduced VAT: 7%, applied in certain specific cases.

German VAT is also known as Mehrwertsteuer (MwSt) or Umsatzsteuer (USt). Below, we explain this VAT in more detail and how you can recover it.

VAT rates in Germany by products and services

In this section, you will find different examples of products and services that are subject to one VAT rate or another. In some cases, depending on the supplier, the same service or product may fall under one category or the other. With that in mind, here are the lists.

Standard VAT rate of 19%

• Food products
• Pharmaceutical products without a reduced rate
• Child car seats
• Passenger transport
• Books and magazines whose content may be harmful to children or mainly advertising-based
• Admission to amusement parks
• Pay TV or cable TV
• Admission to sporting events
• Repair of shoes and other leather goods
• Repair of clothing and household linen
• Hairdressing services
• Fuels
• Vehicle rental
• Tolls

Reduced VAT rate of 7%

• Food products such as bread, milk, meat, fruit, vegetables, etc.
• Pharmaceutical products, including some feminine hygiene products, prostheses, orthoses and other devices used to correct functional defects or diseases, etc.
• Water supply
• Medical equipment for people with disabilities
• Passenger transport
• Books
• Newspapers
• Periodicals
• Cultural events such as theatres, museums, concerts, etc.
• Sporting events
• Writers and composers
• Hotel accommodation
• Rental of living rooms and bedrooms for short-term accommodation
• Restaurant and catering services

How to deduct German VAT

Germany is one of the countries most open to VAT recovery for companies, whether or not they are established in the country. In the case of foreign companies that do not have a registered office in Germany, the VAT recovery process will vary depending on whether the company is European or non-European.

For European companies

If your company is registered in a European Union country, you can recover VAT in Germany in accordance with European Council Directive 2008/9/EC. Here are some key points:

• Application deadline: Up to 9 months after the calendar year, with a final deadline of 30 September.
• Minimum amount: The amount must be at least €400 for periods of 3 months, or €50 for the remaining months of the calendar year.

For non-European companies

If your company is located outside the European Union, the procedure is governed by the 13th European Directive. Some key details include:

• Deadline: 30 June of the year following the calendar year in which the expense was incurred.
• Reciprocity requirements: Your company may only request a VAT refund if there is a reciprocity agreement between Germany and your country. This means that both countries must allow foreign companies to recover VAT under similar conditions.
• Deductible expenses: The deductibility of expenses will be determined according to German legislation. It is essential to review Germany’s specific regulations to make sure your expenses qualify for a VAT refund.
• Minimum amount for the application: For applications covering periods longer than 3 months, the minimum amount of VAT to be recovered must be at least €1,000. If the application covers a full year, the minimum required amount is €500.
• Submission of the application: Although the application process is carried out electronically through the BOP, original invoices must be sent in order to complete the procedure.

How to recover VAT in Germany

Here are some of the steps you will need to follow in the case of domestic VAT recovery, that is, when a German company recovers VAT in Germany:

• Registration: The first step to recover VAT is to register in order to obtain a Steuernummer, or German tax identification number.
• Required documentation: Certificate of incorporation, commercial register extract and VAT certificate.
• Application: You must complete and submit the VAT registration form, which varies depending on whether your company is from the EU or from outside the EU.

You can request a VAT refund as long as the tax is associated with services and products related to your business activity. In fact, when the use of an asset for business purposes is less than 10%, the input VAT related to that asset will generally not be deductible.

In other words, in Germany almost everything is deductible as long as it can be properly justified.

To understand which expenses you can deduct in Germany, it is easier to look at the expenses that cannot be recovered, as there are only 2 limitations:

• Luxury goods.
• Gifts to people outside the company that exceed €35 per year.

Below, we give you some additional details that you should take into account when managing VAT in Germany as part of your VAT recovery process.

Deadlines and due dates

VAT payment and the submission of VAT returns must be completed before the 10th day of the following month. For example, VAT corresponding to January must be paid before 10 February.

In the case of the annual VAT return, which is not a VAT recovery process but an informative declaration, the deadline is 31 May.

In addition, if the VAT collected in the previous year exceeds €7,500, preliminary monthly returns must be submitted.

VAT limitation period

VAT has a limitation period of 4 years, starting from 31 December of the year in which the return was submitted. This means there is a time limit for claiming a refund or for the tax authorities to carry out inspections.

If the annual VAT return has not been submitted, the limitation period is extended to 7 years, and up to 10 years in cases of tax evasion.

As you can see, VAT in Germany has its own complications. If you want us to make your life a little easier, at 60dias we can manage your expense receipts and obtain the corrective invoices needed to submit your VAT on time.