In Germany, all entrepreneurs who are engaged and independently active in a trade, business or profession with the purpose of generating income, are liable to value-added-tax also known as turnover tax (Umsatzsteuer). The following information on VAT is a general overview.
VAT is raised regardless of citizenship, residence, main place of management, or the place of billing or payment. The only criterion for charging VAT is that the entrepreneur executes taxable transactions within the country above a certain volume. The German Turnover Tax Law, based on the EU VAT Directive, covers the following transactions that are liable for the German VAT:
The supply of goods and services within Germany The importation of goods from territories outside the EU into Germany, also called ''import turnover tax'' (Einfuhrumsatzsteuer) The movement of goods into Germany from another territory within the EU (Intra-Community acquisitions) also called ''acquisition VAT'' (Erwerbsteuer). VAT rules distinguish between the place of supply of goods and services and define which transactions are performed for business and private customers.
The standard VAT rate for the supplies of goods and services in Germany is 19 percent. Certain goods - like books and food - and services are subject to the lower rate of 7 percent. There are some goods and services that are exempt from VAT. The most common are intra-EU-deliveries of goods, exports of goods to a non-EU destination and services related to these deliveries.
Since VAT is a very complex subject and there are many different cases and exceptions, it is recommended that all trading companies seek competent advice in this area, to make sure that they are fully informed about the taxes that apply to their products. A suitable tax advisor might be found through the search engine of the German Association of Tax Advisors.
Furthermore The German Federal Central Tax Office maintains a comprehensive online tax information center on taxes in Germany and the taxation procedure. More information on the European harmonization process of the European taxation systems can be found on the relevant pages of the European Commission.
Goods coming from non-European countries into Germany are subject to an ''import turnover tax'' (Einfuhrumsatzsteuer) of 19 percent. It is equivalent to the value-added tax (Mehrwertsteuer) which is levied on all domestically sold items placing the same tax burden on imported and domestic products.
The import turnover tax is charged on the customs valuation on the imported good plus a customs duty. A discounted tax of 7 percent is levied on food products, books, newspapers, pieces of art etc.
Importers can deduct this import tax as input tax (Vorsteuer) from their value-added tax bill, if the goods have been acquired for resale purposes. In order to do this, the company must be able to provide the necessary import documents (import declaration).
The German customs authorities collect both customs duty and import turnover tax. Further information on the import turnover tax is available on the website of the German Customs Office.