VAT in Germany [Umsatzsteuer]

Key Takeaway

• VAT or Umsatzsteuer (USt.) is a type of tax that businesses collect from customers and pay to the tax office. It’s also known as “Mehrwertsteuer (MwSt.)”.
• You (a business owner) must file and pay advance VAT returns (Umsatzsteuervoranmeldung) monthly, quarterly, or yearly, depending on how much VAT you collected in the previous year.
• If you want to sell goods or services across the European Union, you need a VAT ID (Umsatzsteuer-ID) number.
• You (business owner) don’t charge non-EU customers VAT.

This is how you do it

• You can apply for the VAT ID (Umsatzsteuer-ID) when completing the Fragebogen für Steuerliche Erfassung.
• You can also apply for the VAT ID later by completing the form on the Federal Ministry of Finance’s website.

Table of Contents

What is VAT?

VAT or Umsatzsteuer (USt.) is a type of tax that businesses collect from customers and pay to the tax office. It’s also known as “Mehrwertsteuer (MwSt.)”.

You (as a business owner) must charge VAT on every product or service you sell. You pay the collected VAT to the tax office (Finanzamt) during the monthly, quarterly, or yearly advance VAT returns.

VAT is also known as “sales tax” and “value added tax” in English.

The German VAT rate changes depending on the products or services. There are two main VAT rates in Germany:

• The Standard VAT rate (Regelsteuersatz): 19%
• The Reduced VAT rate (Ermäßigte Steuersatz): 7%

And for some products, there is no VAT or a different VAT.

VAT (Umsatzsteuer)	Products and Services
19% VAT According to Section 12 (1) of the Sales Tax Act (Umsatzsteuergesetz)	– Clothing – Wine and selected drinks – Furnishings and electronics – Vehicles – Medications – Restaurant service
7% VAT According to Section 12 (2) of the Sales Tax Act	– Food (daily necessities) – Plants and animals – Books and magazines – Cultural events (theater performances, concerts, museums) – Artworks – Hotel accommodations – Public transport (up to 50 km)
No VAT According to Section 4 of the Sales Tax Act	– Export to non-EU countries – Intra-community supplies (i.e., when you sell goods and services to companies within the EU). – Maritime and air transport – Medical treatments  – Real estate sales – Rental – Insurance and credit brokerage, etc.

Note: You don’t charge VAT when selling your products or service to customers residing in non-EU countries.

Key terms you must know when dealing with VAT in Germany

Collected VAT (Vereinnahmte Umsatzsteuer) vs. Input VAT/Input tax (Vorsteuer)

	Collected VAT	Input Tax
Description	The VAT you (as a business owner) collect from your customers is called “Collected VAT (Vereinnahmte Umsatzsteuer).”	The VAT you (as a business owner) pay when buying from a third party is called “Input tax (Vorsteuer)”.
Example	Net price of your product: 1000€ VAT you collect: 19% of 1000€ = 190€ (This is called the “collected VAT”)	Net price of the product you bought for your business: 500€ VAT you pay: 19% of 500€ = 95€ (This is called the “Input tax”)

Gross (Brutto) vs. Net (Netto) price

Net Price (Netto) = Actual product price

Gross Price (Brutto) = Actual product price + VAT

Example: Suppose the actual price of a printer is 100€. In this case, 100€ is the net price of the printer.

When you buy the printer, you pay 19% VAT on top. The price after adding VAT is 100€ + 19% of 100€ = 119€. This is the gross price of the printer.

How do you get a VAT identification number (Umsatzsteuer-Identifikationsnummer (USt-IdNr.))?

Every founder who intends to sell products and services across the EU requires a VAT ID (Umsatzsteuer-ID). You can apply for a VAT ID in the following ways:

• When filling out the tax registration questionnaire (Fragebogen Zur Steuerlichen Erfassung). After registering your business (Gewerbeanmeldung), you must complete a tax questionnaire to receive your business tax number (Steuernummer). When filling the form, check the VAT box to receive your VAT ID (Umsatzsteuer-ID).
• Online: You can apply for a VAT number separately by filling out a form on the Federal Ministry of Finance’s website.
• In writing: You can also apply for a VAT ID by sending a letter to the Federal Central Tax Office. You must mention the following information in the letter. 
  • Your name and address
  • Responsible tax office
  • Business tax number

You must send the letter to the following address:

Federal Central Tax Office
Saarlouis Office,
66738 Saarlouis

Why do you need a VAT ID?

As a self-employed individual, you must enter your VAT ID (USt-IdNr.) in your invoices. You must write your business tax number if you don’t have a VAT ID.

Invoices without a VAT ID or tax number are invalid.

When will you receive your VAT number (USt-IdNr.)?

The tax office mails your VAT ID. You should receive it in one to two months.

Who pays VAT in Germany?

According to Section 1 of the Sales Tax Act (Umsatzsteuergesetz), any sales or deliveries an entrepreneur does in exchange for profit are subject to VAT (Umsatzsteuer).

So, every self-employed individual and business must charge VAT on their products and services, unless they have opted for the “small business regulation”.

Advance VAT return (Umsatzsteuervoranmeldung) 

You collected the VAT from your customers. What’s next?

Here is what you must do to pay the collected VAT to the tax office.

• Calculate how much VAT you owe.
• Declare the VAT you owe to the tax office.
• Pay the VAT you owe to the tax office.

The process of calculating, declaring, and paying the VAT you owe to the tax office is called “advance VAT return (Umsatzsteuervoranmeldung).” 

NOTE: You don’t receive any notifications from the tax office. You must do all of this yourself.

How do you calculate the VAT you owe to the tax office?

Here is the formula to calculate the VAT you owe to the tax office.

VAT you owe = VAT you collected (Vereinnahmte Umsatzsteuer) – VAT you paid (Vorsteuer)

Deducting “VAT you paid” from the “VAT you collected” is called “Vorsteuerabzug” in German.

Example:

• Suppose you made a sale of 10,000€ in April 2025. You collected 19% of 10,000€ = 1900€ VAT.
• Suppose you purchased raw materials for 7,000€ in April 2025. So, you paid 19% of 7000€ = 1330€ VAT.
• Per the formula, VAT you owe = 1900€ – 1330€ = 570€.
• You must declare that you owe 570€ VAT to the tax office and pay it.

Bookkeeping software automatically does the following for you:

• calculates the VAT you owe,
• and declares it to the tax office.

You only have to pay the VAT you owe. You can do it in three ways.

• Set up your bookkeeping software to automatically pay the VAT you owe.
• Pay the VAT you owe manually.
• Give the SEPA mandate to the tax office. This way, the tax office will automatically deduct the VAT you owe from your business bank account.

How often must you declare the VAT you owe to the tax office?

The frequency of “advance VAT return (Umsatzsteuervoranmeldung)” depends on the total VAT you paid to the tax office in the previous year.

VAT you paid in the previous year	Frequency of “advance VAT return” in the current year (Umsatzsteuervoranmeldung)
More than 9,000€	Monthly
2000€ to 9000€	Quarterly
Less than 2000€	There is no “advance VAT return” (Umsatzsteuervoranmeldung). You only complete the “VAT return” (Umsatzsteuererklärung) at the end of the year.

What is the frequency of “advance VAT returns” for new startups?

As a new founder, you have no history of VAT payments to the tax office. In this case, you estimate the VAT you may collect in the first year of business. Based on this estimate, the “advance VAT return” frequency is determined for the first year of business. 

You enter the VAT estimate when you complete the tax registration form.

Suppose you didn’t enter the VAT estimate when completing the tax registration form. In this case, you must make the “advance VAT returns” quarterly for the first year. 

The “advance VAT return” frequency from the second year is based on the VAT you paid to the tax office in the last year.

What is the annual “VAT return” (Umsatzsteuererklärung) in Germany?

At the end of the year, you (as a business owner) must also do an annual “VAT return” (Umsatzsteuererklärung). 

You may wonder why you must do an annual “VAT return” when you have already made the “advance VAT returns” during the year. The reason is that you may have missed something or made a mistake when making “advance VAT returns”. The annual “VAT return” is your chance to fix it.

You must do the following in the annual VAT return (Umsatzsteuererklärung).

1. Calculate the VAT you collected (Vereinnahmte Umsatzsteuer) from your customers in the year.
2. Calculate the VAT you paid (Vorsteuer) when buying your business-related products or services in the year.
3. Calculate the VAT you owe for the year based on the above two values.
4. Calculate the total “advance VAT returns” you have already paid for the year.
5. Ideally, the VAT you owe from point 3 should be the same as the “advance VAT returns” from point 4. However, if you had paid
   • too much VAT in advance, the tax office will refund you the excess amount.
   • too little VAT in advance, the tax office will charge you the remaining amount.

Suppose you have prepared your “advance VAT returns” accurately. In this case, the annual “VAT return” is just a formality.

Deadline for “advance VAT return” (Umsatzsteuervoranmeldung) in Germany

The deadline for calculating, informing the tax office, and paying the VAT you owe to the tax office depends on the “advance VAT return” frequency.

“Advance VAT return” frequency	Deadline		Example
Monthly	The 10th of the following month.		The deadline to inform the tax office and pay the VAT you owe for February is 10 March.
Quarterly	Q1	10th April	The deadline to inform the tax office and pay the VAT you owe for Q1 is 10 April.
	Q2	10th July
	Q3	10th October
	Q4	10th January

NOTE: If the last day of the deadline falls on a weekend or a public holiday, the deadline will automatically extend until the next working day.

Permanently extended “advance VAT return” deadline (Dauerfristverlängerung)

Suppose calculating and paying the VAT in 10 days is tough for you. In this case, you can request a permanent deadline extension from the tax office. This is called “Dauerfristverlängerung” in German.

Suppose the tax office grants you a permanent extension for “advance VAT returns”. In this case, the submission and payment deadlines are postponed by one month (§§ 46 ff. UStDV).

For example, the extended deadline to submit the “advance VAT return” for February is 10th April instead of 10th March.

With an extended deadline, you pay the VAT one month later. As a result, the tax office loses interest. 

This is why the tax office requires you to make a one-time special advance payment (Sondervorauszahlung) to compensate for the lost interest. The special advance payment is offset against the VAT payment burden for December.

How much is the special advancement payment?

Your special advance payment is one-eleventh of last year’s total VAT advance payments.

Example: In 2024, you paid 11,000€ to the tax office in “advance VAT returns”. In 2025, you applied for an extended deadline. In this case, you must pay 1/11th of 11,000€ = 1,000€ as a special advance payment to the tax office. The 1000€ you paid to the tax office will be offset against the Dec 2025 VAT payment.

Deadline for an annual “VAT return” (Umsatzsteuererklärung) in Germany

The deadline for the annual VAT return is July 31 of the following year. If you hired a tax advisor, the deadline is extended to the end of February of the year after next.

Example: The deadline for the 2025 annual VAT return is 31 July 2026. If you hired a tax advisor, the deadline is extended to 28 February 2027.

How to Know When to Charge VAT as a Business Owner in Germany

With globalisation, you are not limited to buying and selling in Germany only. It’s normal for businesses to trade all over the world. 

However, each country has its own rules regarding taxes. You (as a founder) must comply with these rules to avoid surprises or penalties.

Let’s take different use cases and understand when and how to charge VAT.

The customer or the service provider is	Do you charge your customer VAT?		Do you pay VAT when buying goods or services for your business?
	Customer with a valid VAT ID	Customer with no VAT ID
In Germany	Yes	Yes	Yes
Outside Germany but within the EU	No (Intra-community supply)  You must mention the following on your invoice. – “Reverse charge procedure”  – Your’s and your customer’s VAT ID.	Yes Depending on your sales in the EU, “One-Stop Shop (OSS)” may apply.	You don’t pay VAT to the service provider as they will use the “reverse charge procedure”. However, you are responsible for declaring and paying the VAT to the German tax office.
Outside the EU	No	No	Yes

Case 1: You sell within Germany

When selling your product or service within Germany, you charge your customers the German VAT. It doesn’t matter if your customer is a private individual or another business.

Case 2: You sell outside Germany but within the EU

When selling outside Germany but within the EU, you must differentiate between a private individual and a business.

B2B sale

If you sell to an individual (business) with a valid VAT ID in the EU, you don’t charge them VAT. You issue the invoice for your “net price.” This is considered “intra-community supply” (Innergemeinschaftliche Lieferung).

Your customer is responsible for paying the VAT to the tax office in their home country. This is called the “reverse charge procedure” (Reverse-Charge-Verfahren).

In short, you pass the responsibility of paying the VAT to the tax office to your customer.

Here are your responsibilities as a business owner when implementing the “reverse charge procedure”.

• You must ensure that your customer’s VAT ID is valid. If it isn’t, you are liable to pay the VAT to the tax office regardless of whether you collected it.
• Mention your and your customer’s VAT ID (USt-IdNr.). Otherwise, your invoice is invalid.
• Indicate the reverse charge procedure. Write the following statement on your invoice: “Invoice subject to the reverse charge mechanism – VAT to be accounted for by the recipient“.

B2C sale

The following applies if you sell to an individual without a valid VAT ID.

Your net sales (excluding VAT) outside Germany but within the EU are

• Below 10,000€ (as of 2025): You must charge your customer the German VAT. Report the sale in your German VAT return as a domestic taxable sale. Don’t list it as an “intra-community supply”.
• Above 10,000€ (as of 2025):
  • You opt in to One Stop Shop (OSS): You must charge the VAT of the customer’s country. For example, if your customer is in Austria, you charge Austrian VAT of 20% instead of German VAT of 19%. You submit one OSS VAT return in Germany, listing your total sales per EU country (Zusammenfassende Meldung). The German tax office forwards the VAT to the appropriate EU countries.
  • You are not in OSS: You must register for VAT in each EU country you sell to, charge the local VAT, and file local VAT returns.

Case 3: You sell outside the EU

You don’t charge any VAT to customers who live outside the EU.