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):
Foodstuff7% and 19%
Pharmaceutical products (certain feminine products are taxed at 7% rate)19%
Medical equipment for disabled persons7%
Children´s car seats19%
Passenger transport7% and 19%
Books on other physical means of support19%
Admission to cultural services (theatre, etc)7%
Admission to amusement parks19%
Pay TV / cable19%
Writers / composers7%
Restaurant and catering services7%
Admission to sporting events7% and 19%
Medical and dental care7%
Shoes and leather goods19%
Clothing and household linen19%
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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€ or 60€ depending on the recipient
- Luxury goods
- Employees private telephone bills (regardless if landline or mobile)
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).