What is the VAT number?
The VAT number in Germany is used to identify you when making payments to the VAT department in Germany (Finanzamt). The VAT number is referred to with different names, but they all mean the same: Umsatzsteuernummer, Umsatzsteuer-Identifikationsnummer or USt-IdNr.
The VAT number has the standard European format of the country prefix “DE”, followed by 9 numbers; DE123456789. In order to request a new VAT number you need to register by filling out the Fragebogen zur steuerlichen Erfassung. Tax registration for sole proprietorship can be done online via ELSTER.
German VAT Rates
Since Germany is an EU country it must follow EU rules on VAT compliance, but as long as it is over 15%, Germany can set its on standard upper VAT rate. Suppliers of services and goods VAT registered in Germany must charge and collect the appropriate VAT rate and forward the payment to German tax authorities and fill in their VAT return.
As of 2023, the current German VAT rates are as follows:
Standard VAT Rate: 19%
Reduced VAT Rate: 7%
These rates apply to the supply of goods and services in Germany, and businesses VAT registered in Germany must charge and collect the appropriate VAT rate based on the nature of the transaction. It's important for businesses to stay updated on VAT regulations to ensure compliance with German tax authorities.
Registering for a VAT Number
Before you register for a VAT number, there are a number of things you need to take into consideration and a few things that are required to have in place before you register for a VAT number.
Having The Correct Residence Permit
Anyone from third-world countries, meaning non-EU countries or those that have special agreements with Germany, must make sure to have the correct VISA. On the back of the residence permit (Aufenthaltstitel) on line 3, it will state “Selbständige Tätigkeit gestattet” which means “self-employment allowed”. If your residence permit does not allow being self-employed or starting a business, it is important you get the correct residence permit first. Also note that third-country nationals must have a valid VISA before entering the country.
Registering Your Address and Get Your Tax ID
Once you arrived in Germany, you need to register your address (Anmeldung). Within about 4 weeks, you will also receive your unique Tax Identification Number (TIN) or Tax ID which is used to identify you in relation to tax inquiries only.
Obtaining a Trade License if Required
In Germany there are three types of businesses you can register:
- Kleinunternehmer (small business)
- This type of business must have a revenue of less than €22,000 the first year and no more than €50,000 the following years. This type of business are not required to charge VAT.
- Freiberufler (Freelancer)
- This type of registration is for professionals with special qualifications who sell their services. Ultimately it is the Finanzamt that will determine if you can be a freelancer/self-employed or not.
- Gewerbe/Gewerbetreibende (trade/tradesperson)
- If you do not fall under the freelancers category, specially businesses that sell physical goods, the correct registration would be as a tradesperson.If you are a tradesperson you are required to complete the trade registration (Gewerbeanmeldung) and obtain a trade licence (Gewerbeschein) before registration for a VAT number.
Having a Bank Account
In order to register for a VAT number you need to have a bank account. It is not required to have a German bank account, or a specific business account. A personal bank account in another EU country is also sufficient.
German VAT Compliance
Once you are registered for German VAT, you need to follow the rules let out in the German VAT act in a number of aspects. This includes:
- Issue invoices with the required disclosure details;
- Electronic invoices containing proper signature, authenticity and agreement by recipient;
- Maintain record of accounts for a period of at least 10 years;
- Correct VAT invoicing for goods or services in according with the time of supply VAT rules;
- Processing of credit notes and other corrections; and
- The use of approved foreign currency rates.
German VAT tax Point
The tax point, or also referred to as time of supply, are the rules in the German VAT act which determine when VAT is due. For most goods it is the time of delivery, in case of services, it is the time of completion of the service. The VAT charges are then payable to the tax authorities within 10 days after the end of reporting period.
VAT Refunds on Purchases When Visiting Germany
If you are a German business who charges VAT, you can also claim back VAT on purchases your business requires in order to run. However, if you are a business outside Germany, you may still be able to claim VAT in your home country. The process is generally the following:
The procedure of VAT refunds on purchases
- Get export forms from retailers You should inform the retailer before you purchase the goods that you intend to export it to your home country (outside the EU). Together with your receipt, you will then receive the export papers (Ausfuhrbescheinigung) or a Tax Free Shopping Check.
- Export papers are required to be stamped at the airport When leaving the EU via Germany only, you are required to present the export papers, the original receipt, the purchased goods (including price tag) and your passport showing you reside outside the EU.
This has to be presented to the customs unit at the airport. It is important that you leave Germany on a non-stop flight directly to your country of residence. The export papers will then be stamped.
- Return stamped tax papers The stamped tax papers should be returned back to the store you purchased the goods from once you arrive your home country. If you have a tax free check instead of the tax forms, you may be able to get a cash payout directly at the airport. Otherwise a check will be issued to you.