Temporary reduced German VAT rates are back to normal in 2021

To help businesses during the height of the pandemic, German VAT rates were temporarily reduced. As of 1 January 2021, they are back to normal.

14 January, 2021


Changes in German VAT rates

Effective in July 2020, German VAT rates were temporarily reduced from the standard rate of 19% to 16% and from the reduced rate of 7% to 5%. This reduction was applicable until January 2021, and taxpayers can now expect to apply the normal German VAT rates on their transactions.

Changes in VAT rates often come with questions on certain transactions spanning over periods in which the two rates (the old rate and the new rate) are applicable. Advanced payments, continuous supplies of services, or credit notes are scenarios that raise doubts concerning the correct VAT rate that must be used.

To determine the correct rate in Germany, it is important to review the German tax point rules. For example, if a pre-payment is made in 2020 for a transaction that will take place in 2021, you will need to account for VAT under the old rate on the amount of that prepayment and under the new rate on the remaining amount to be paid (assuming that the remaining amount is paid in 2021).

Applicable VAT rates in Europe

When there are changes in VAT rates, it is essential to make sure the correct rates are applied to avoid possible sanctions from the local tax authorities. Check out our general overview of European VAT rates to keep up to date. Keep in mind that for certain products, an analysis should be carried out based on the CN code of the item.

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