Sales Taxes in Germany

Find out more on how VAT (USt) works in Germany, who pays it, and why...

Value Added Tax (Umsatzsteuer)

Every sale is levied with VAT. End-consumers have no opportunity to reclaim VAT but business owners can. Input VAT can be reclaimed from the tax authorities, helping to ensure liquidity.

From certain thresholds on, every business is VAT-liable, unless expressly exempted. Before reaching these thresholds, business owners can opt in to pay VAT.

There are two reasons to opt not to pay VAT: less organisational work (accounting), and not having to levy VAT on the invoice amount.

Every start-up business-owner not exceeding the relevant thresholds can, however, opt in to pay VAT. The main advantage is liquidity, and sooner or later the organisational work (accounting) must be done. The better its bookkeeping, the more in control a company is of its financial status.

The general VAT tax rate is 19%; some items are taxed at a rate of 7% like food or literature or are entirely tax exempt.

Disclaimer: Tax law is a complex matter. Any information provided on this website is intended as a summary and not to be more than a general overview. A specific client-advisor relationship does not arise from any information shown herein. Neither the author nor the publisher are responsible for any liability, especially for actions taken on the basis of information contained in this summary, nor for any errors, omissions etc. This text is not intended to render legal, accounting or tax advice.

Due to the complexity of tax law in any country and especially the interaction of multiple tax systems it is always recommended and encouraged to seek professional advice concerning specific matters before making any decision.

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