GermanyManual

Value Added Tax in local language is "Mehrwertsteuer" and the acronym VAT is translated as "MWSt".

VAT in Germany

German VAT rates

Value Added Tax in local language is "Mehrwertsteuer" and the acronym VAT is translated as "MWSt". The German VAT rates are:

  • Standard rate: 19%
  • Reduced rates: 7%

Germany has not introduced a super-reduced VAT rate. Reduced VAT rates apply on a number of items allowed by the VAT Directive (source: European Commission):

  • Foodstuff
    7% and 19%
  • Water supplies
    7%
  • Pharmaceutical products
    19%
  • Medical equipment for disabled persons
    7%
  • Children´s car seats
    19%
  • Passenger transport
    7% and 19%
  • Books
    7%
  • Books on other physical means of support
    19%
  • Newspapers
    7%
  • Periodicals
    7%
  • Admission to cultural services (theatre, etc)
    7%
  • Admission to amusement parks
    19%
  • Pay TV / cable
    19%
  • TV licenses
    0%
  • Writers / composers
    7%
  • Hotel Accommodation
    7%
  • Restaurant and catering services
    19%
  • Restaurants
    19%
  • Admission to sporting events
    7% and 19%
  • Medical and dental care
    7%
  • Shoes and leather goods
    19%
  • Clothing and household linen
    19%
  • Hairdressing
    19%

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German VAT deduction limits

Unlike most EU countries, Germany only restricts VAT deduction on a few items. In general, input VAT incurred in the course of a business in hotel expenses, restaurants, attendance to conferences, telephone, taxi or entertainment is 100% deductible.

The following items are not VAT deductible:

  • Gifts to non-employees with a value over 35€ a year
  • Luxury goods

Any other input VAT is fully deductible as long as it is incurred as part of a business activity. Where the business use of an item is below 10%, this item is generally not deductible.

Input VAT prior to start a business (e.g. before a VAT registration) may be deductible, however, this should be agreed with the competent tax office, particularly for material amounts.

German Statute of limitations

The statute of limitations is the period in which the authorities can go back to investigate a tax liability. This is normally the same period in which a taxpayer can go back to request a tax credit.

The statute of limitations in Germany is 4 years. This start point of this period is the 31st December of the year in which the annual VAT return was filed. In any case, this period cannot start being counted later than 3 years from the time VAT became due. If no annual VAT return was filed, the statute of limitation is 7 years.

There is an extended period of 10 years in case of tax evasion.

German tax point rules

The tax point is the time when VAT becomes due in a transaction. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.

  • General rule: Tax point arises when the goods are put at the disposal of the customer or when the service is completed
  • Prepayments: In case of prepayments of all or part of the agreed price, VAT is due at the end of the VAT return period in which the payment was received
  • Continuous supplies of services: The tax point occurs when the service is completed or, if partial payments are made periodically (e.g. Lease payments), these payments are considered separate supplies, hence VAT becomes due as per the general rule for each payment
  • Intra-Community acquisitions: Tax point occurs at the end of the month in which the IC-acquisition happened. If an invoice is issued, the tax point is on the date of the invoice
  • Intra-Community supplies: The tax point occurs on the end of the month in which the IC-supply was made

Import: Tax point arises when the goods are released for free EU circulation (customs cleared or outside the customs suspension regime). The payment of import VAT can be delayed up to 45 days (deferred import VAT).

 

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