Taxes in Europe Database v2
The legal basis for the imposition of value-added tax comprises the VAT Act as published on 21 February 2005 (Federal Law Gazette 2005 I p. 386) last amended by Articles 9, 10 and 11 of the Act of 22 December 2014 (Federal Law Gazette 2014 I p. 2417).
The territory of the Federal Republic of Germany except the territory of Büsingen, the island of Heligoland, the free zones of the control type I under section 1 subsection (1), first sentence of the Customs Administration Act (free ports), the waters and foreshores between the border and the respective shoreline as well as German ships and German aircraft in areas not belonging to a customs territory.
Turnover Threshold: € 17,500 respectively € 50,000
As a consumer levy, VAT is so designed as to fall on final consumer expenditure. However, it would be technically infeasible to collect VAT from the consumer, and tax liability therefore attaches to entrepreneurs who realize a taxable turnover (or, under the reverse-charge system, to the entrepreneurs receiving goods or services). They are in turn obliged to pass on VAT to the recipient of their goods or services by including it in the price they charge. Entrepreneurs will frequently indicate this by showing the amount of VAT separately on their invoices for taxable turnover. On invoices to other entrepreneurs and legal entities they are in fact bound to show the amount of tax separately. The same applies in the case of taxable supplies under contract for work and materials or other supplies in connection with an item of real property. VAT is classified as an indirect tax in view of the fact that it is collected from the consumer by way of the entrepreneur.
All public and private consumption (i.e. goods and services supplied to the final consumer).
VAT is payable on
Value-added tax (or turnover tax), which in the tax system is classified among taxes on income, property and transactions (with the exception of import VAT) has the economic effect of a broadly‑based excise duty and is chargeable as a rule on all public and private consumption (i.e. on goods and services supplied to the final consumer). It differs in this respect from income tax and wages tax, which take account of the individual taxable capacity of each taxpayer.
Value-added tax cannot have a cumulative effect. That is to say there can be no tax on tax. This is ensured by providing for the deduction of prior VAT (referred to as input tax).
Entrepreneurs are entitled to deduct from the tax payable on their turnover the input tax charged to them on invoices rendered by other entrepreneurs for their taxable supplies. The VAT paid on intra-Community acquisitions is also deductible as input tax, as is the import VAT paid by an entrepreneur to a customs office on the importation of goods from non-EU countries.
No input available
The VAT Act provides an extensive list of goods and services exempted from VAT. The first category covers supplies for which input tax remains deductible ("zero-rated'' supplies): these are for the most part export and intra-Community supplies, certain turnover realised in sea and air transport and a number of other turnover relating to import, export and transit goods. The second category covers supplies in respect of which no input tax may be deducted ("exempt'' supplies). These include, in particular, the provision of credit the renting of real property hospital and medical care services provided by statutory social insurance funds services provided by establishments for the care of those in need of physical, mental or psychological assistance turnover realised by entrepreneurs who are registered blind persons and services provided by voluntary welfare organisations, private schools, theatres, orchestras, museums, zoos, educational facilities and youth welfare services.
VAT is not imposed on entrepreneurs resident in Germany, in a free zone or in certain regions of the coastal waters whose turnover (plus the VAT payable thereon) did not exceed € 17,500 in the previous calendar year and is not expected to exceed € 50,000 in the current calendar year (small-scale entrepreneurs).
However, such persons are not entitled to deduct any input tax charged to them, nor to render invoices showing tax separately. Because they are not permitted to deduct input tax, this arrangement may prove unfavourable for some small-scale entrepreneurs. The law therefore allows them to opt either for the special arrangement or for taxation in accordance with general provisions. If they opt for the latter they are bound to this decision for a period of five years.
Entrepreneurs whose previous year's turnover (plus the VAT payable thereon) exceeded € 17,500 are obliged without exception to submit to taxation in accordance with general provisions. Consequently, they are entitled to deduct input tax and must render invoices showing tax separately. The same applies to those entrepreneurs whose turnover (plus the VAT payable thereon) did not exceed the limit of € 17,500 in the previous year but is expected to exceed € 50,000 in the current calendar year.
Standard VAT-rate 19.00%
Reduced VAT-rate 7.00%
Most goods and services are taxed at the general rate.
The reduced rate applies in particular to the supply, importation and intra-Community acquisition of almost all foods, with the exception of beverages and catering supplies. It also applies, for instance, to local transport, to the supply of books, newspapers and periodicals and to certain art objects.
In terms of revenue, value-added tax is one of the most important taxes imposed in the Federal Republic of Germany. Given a uniform rate of tax, the present system of value-added taxation is arranged in such a way that all goods and services bear the same tax burden when they reach the final consumer. The amount of tax payable will correspond to the rate applicable to the goods or services supplied. The number of stages in the process of production or distribution that goods or services have passed through on their way to the consumer is immaterial.
The advance value-added tax payment must be made by the 10th day after the expiration of the provisional return period. The provisional return period is the calendar quarter. If the tax for the preceding calendar year exceeded € 7,500, the provisional return period is the calendar month. If the tax for the preceding calendar year did not exceed € 1,000, the tax office may exempt the entrepreneur from the obligation to submit provisional returns and make advance payments.
When the entrepreneur takes up professional or commercial activity, the provisional return period is the calendar month for the year of start-up and the following year.
The final payment of the value-added tax must be made one month after the annual tax return is filed.
The Value-added tax is collected by the tax authorities of the federal states (Länder).