VAT registrations and simplications in Germany
When do I need a German VAT number?
As a general rule, a foreign business must register for VAT in Germany as soon as a taxable supply is made. The following are the usual examples of taxable transactions:
- Domestic supply of goods not reverse charged: A supply of goods located in Germany where the supply is not subject to reverse charge requires a VAT registration of the supplier
- Supply of services not reverse charged: Foreign businesses supplying services on which German VAT is due must register for VAT. These services are rather exceptional, as the general B2B rule would apply
- Export: Exporting goods to a non-EU country requires a VAT number before the export is made
- Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT
- Intra-Community supply: Supplying goods another Member State is also a taxable transaction that obliges the supplier to register for VAT
- Distance sales above the threshold of 100,000€ also require a VAT number. See German distance sales rules for more information
A backdated registration is possible. In that case, all historic VAT returns must be filed, and potential penalties may be charged by the authorities on late VAT payments. We suggest agreeing the approach beforehand with the responsible tax officer.
There is no registration threshold for foreign non-established companies in Germany. For these businesses, a registration is required prior to the first taxable transaction made in Germany. Small established companies can avoid a VAT registration if the turnover of the previous year did not exceed 15,000€ and will not exceed 50,000€ in the current year.
Fiscal representative requirements in Germany
Unlike other EU countries, in Germany, non-EU companies do not require a fiscal representative to register for VAT.
EU and non-EU businesses can register directly for VAT purposes. This means that the legal representative of the company can sign the registration form without any local German involvement.
A fiscal representative or customs agent may be required when performing certain customs related transactions.
German VAT grouping
Germany implemented a VAT grouping simplification. From a VAT perspective, members of the group are integrated in the business of the Head of the group. This simplification is not limited to specific sectors or industries. Also, permanent establishments can be members of a VAT group (the head office abroad would not be considered part of the group).
VAT grouping is mandatory in Germany. Where two or more established companies are bound to each other, these businesses are treated as one taxable person by the German tax authorities.
Taxable persons are considered bound to each other where more than 50% of the shares are directly or indirectly owned by the same company. They may also be considered bound when there are organizational or economic links between these businesses.
Each member of the group must be a taxable person, even holding companies are accepted as group members. The head of the group can be any member. As in most countries, one single VAT return is filed for the entire group. Members are jointly and severally liable for all VAT liabilities.
German consignment or call-off stock
Germany is one of the few EU countries that has not introduced a consignment stock simplification. However, a recent decision by a local court and it subsequent interpretation by the German tax authorities revised this position for call-of stock arrangements.
Call-of stock may apply in Germany if a purchase contract is in place at the beginning of the transport of the stock and several additional conditions are met. These conditions include that the German customer must be identified prior to the transport of goods into Germany and either the goods must be paid or a binder order must exist between customer and foreign supplier. Moreover, the client must have unlimited access to the goods.
The new call-of stock regime was confirmed by guidelines published by the German tax authorities.
Bad debt relief in Germany
Bad debt relief is available in Germany provided the supplier has sufficient evidence that the relevant transaction became a bad debt.
The process to recover this VAT is simpler than in most countries. There are no time limits, threshold or specific application to be made. The adjustment is made in the current period by reducing the output VAT. In case the adjustment refers to historic VAT periods for which the annual VAT return has already been submitted, a corrective annual VAT return should be filed.
Businesses claiming input VAT in bad debt supplies must keep all relevant documentation to prove that the invoice has not been paid. There is no exhaustive list of documents that must be kept, however, such documentation must provide enough evidence of the VAT credit.
German import VAT deferral and postponed VAT accounting
Import VAT may be deferred in Germany up to 45 days, but a guarantee must be given by the importer. This system is called the payment simplification scheme.
Postponed import VAT accounting does not exist in Germany. It is not possible to report import VAT in the VAT return as input and output.
Customs (bonded) warehouse and VAT warehouse in Germany
Customs or bonded warehouses are available for goods that have not cleared customs in the EU (T1). VAT and excise duties are not due when these goods are directly placed in the Customs warehouse. As soon as they exit this regime, these amounts are due. VAT is not due neither on sales within the customs warehouse.
VAT warehouses are available for cleared goods (T2). These goods have already paid customs duties. The conditions are similar to those of Customs warehouses. The goods allowed are those included in Appendix V of the VAT Directive, in addition, the following goods may also be subject to this suspension regime: certain wood items, gold, iron and steel product and non-ferrous metal."
Global VAT numbers – German limited fiscal representation
Limited fiscal representation allows taxpayers to avoid a VAT registration by using the VAT number of the representative on certain customs transactions.
Limited fiscal representation may only be performed by tax advisors and tax lawyers as well as German freight companies offering such services for their customers. The fiscal representative has to comply with all regulations which apply to the tax person he is representing (preparation of documentation of invoices, issuance of invoices, preparation and submit of tax returns).
German cash accounting
Small and medium enterprises in Germany can account for VAT on a cash basis. Where applicable, VAT will only be paid to the tax authorities when collected from the customer. The condition is that the taxable turnover in the previous year does not exceed €500,000.
Also, certain taxpayers such as self-employed individuals and companies with no bookkeeping obligations can benefit from the cash accounting scheme. A separate application must be filed, and the authorities should approve the request before this scheme is implemented.