A value-added levy is an administrative tax that is levied in Germany on the provision of products and commodities. Since businesses are obliged to include tax in their rates, the final consumer of the commodity will be responsible for paying this particular levy. Some trades are exempt from paying duties, while others are liable to a discounted rate.
The usual VAT price in Germany will be 19 percent in 2022, however, there will also be a 7 percent discounted rate for some items and activities. These items and activities include food, vegetation, animals, literature, papers, art objects, and admission fees to museums.
If a company’s annual revenue surpasses a specific amount, it must apply for tax in Germany. Both citizens and non-residents must file.
Registration process
Organizations must complete an application, attach an authorization certificate, and submit details regarding the directors, the company’s organizational structure, its activities, and its anticipated revenue to register. A tax registration id will be given to the businesses once all the paperwork has been completed. Businesses who apply for German VAT must disclose the levy’s value on their departing bills.
After completing the German VAT certification phase, the business can utilize its 11-character VAT number, which comprises the country code “DE” and nine numbers. The number’s last two digits are utilized for regulating reasons. In Germany, businesses have two of these numbers: the regular tax id and the EU tax number, which are both used for EU-wide operations.
Requirements for VAT registration
There is typically no minimum criterion for value-added duty registration. If the business plans to conduct sales that are liable to German VAT, certification is necessary. The current licensing threshold for distance trading is €100,000.
The following paperwork is typically required:
- Power of attorney;
- Company’s article of association;
- Business registration documents; and
- The excerpt from the commercial registrar.
When is VAT in Germany required?
Here are several instances where corporations must register if they conduct business abroad:
- Storing supplies in German storage before distributing them to German clients.
- Usage of German Amazon Fulfilment Facility as a foreign merchant via the German warehouse.
- Keeping a freight warehouse in Germany and selling goods to German clients.
- Planning live events including conferences, seminars, and exhibits.
- Purchasing and selling commodities within Germany without them departing the nation.
German value-added duty applications can differ from agency to agency. The duration takes to register may be affected by whether or not the petitioner initially supplies all required documentation.
VAT returns
Firms must respect the German tax certification criteria as well as those for submitting value-added duty returns according to their taxable period.
A business has the option of choosing a monthly or quarterly value-added tax term. The fundamental criterion for a VAT return is to submit an initial report if the total amount of presumed VAT that is owed for the previous calendar year surpasses 7.500 EUR.
Taxes in Germany
The unity levy is added to the commercial income levy rate of 15%, making it 15.825 percent overall. In addition to this, a local transaction levy of 14–17 percent will also be imposed, raising the overall business income tax level. Profits are subject to a 25% withholding levy, while non-resident corporations are eligible for a 40% return. Under a taxation agreement, the tax liability on profits, interest, and revenues may be lowered. Additionally, no levy is applied on dividends that meet the requirements of the EU Parent-Subsidiary Regulation.
The social security levy, real estate transfer tax, and real property tax are additional duties that apply to businesses.
