Value added tax (VAT) is a 19% tax on goods and services.

This guide explains VAT for German businesses. You must understand this to start a business in Germany.

What is VAT?

In Germany, VAT is a 19% tax on most goods and services. In German, it's called Umsatzsteuer (USt.) or Mehrwertsteuer (MwSt.).

VAT is always included in the advertised price1, 2. If the price label says 20€, the customer pays 20including VAT.

VAT included example: On a restaurant menu, a meal costs 15€. You pay 12.61€ for the meal, and 2.39€ VAT; 15€ in total.

Other EU countries also have a VAT; it's between 17% and 25%1.

Reduced VAT

Some goods and services have a reduced VAT or no VAT1, 2, 3.

Reduced VAT (7%):

  • Some foods and beverages1
  • Museum, theatre, concert and sport event tickets
  • Artistic, journalistic and copyrighted work
  • Hotel stays

Full list (in German) — § 12 UStG

No VAT:

  • Medical treatments: doctors, dentists and therapists
  • Teaching, in some cases
  • Social services, in some cases
  • Insurance
  • Rent for long-term, residential spaces
  • Buying and selling property

Full list (in German) — § 4 UStG

Who must charge VAT

    Most German businesses must charge 19% VAT, but there are exceptions:

    Exemption for small businesses

    If you are a small business (Kleinunternehmer), you can choose if your business charges VAT.

    If you don't charge VAT, it means:

    • Less paperwork
      If you don't charge VAT, you don't need to submit VAT returns or VAT declarations1. You save a few hours per month.
    • Lower prices for your customers
      Your prices are lower without VAT. Your private customers pay less, but your income is the same. Your business customers get a refund on the VAT they pay, so they don't care if you charge VAT.
    • No VAT refund on business expenses
      If you charge VAT, you get a VAT refund on your business expenses1. For example, if you buy a computer for your business, you get the VAT back. If you don't charge VAT, you must pay VAT on all expenses. If you have a lot of expenses, it's better to charge VAT and get VAT refunds1, 2.
    • Growing your business is more complicated
      If your revenue grows over 22,000€ per year, you must start charging VAT. You must raise your prices to include VAT, change your invoices, and maybe change your accounting tools. If you raise your prices, you can lose customers1. If you plan to make over 22,000€ per year, it's easier to charge VAT from the start.

      You decide when you register your business with the Finanzamt. If you choose to charge VAT, you must always charge VAT. You can't change your mind for 5 years1.

      If you choose not to charge VAT, you must add this line to your invoices1, 2:

      English: “In accordance to § 19 UStG, no value added tax is charged.”
      German: “Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.”

      If your revenue grows over 22,000€ per year, you must start charging VAT in January the next year1.

      How to charge VAT

      1. Charge VAT on the goods and services you sell.
      2. Pay VAT on your business expenses.
      3. Calculate the difference between the VAT you charge and the VAT you pay.
      4. Tell the difference to Finanzamt with a VAT return.
      5. Pay the difference to the Finanzamt with a bank transfer. If the difference is negative, the Finanzamt pays you1.
      Example:
      You make 20,000€ in sales, including 3,193€ VAT
      You pay 12,000€ for tools and supplies, including 1,916€ VAT
      You must give 1,277€ to the Finanzamt (3,193€ − 1,916€)
      Example with negative VAT:
      You make 20,000€ in sales, including 3,193€ VAT
      You pay 100,000€ for new office equipment, including 15,966€ VAT
      The Finanzamt must give you 12,773€ (15,966€ − 3,193€)

      1. Register for VAT

      When you start your business, you must register it with the Finanzamt. This is how you get a Steuernummer and a VAT number. You must put those numbers on your invoices, and start charging VAT.

      How to register your business ➞

      When you fill the registration form, you can register as a small business that does not charge VAT.

      During the registration, you can give the Finanzamt a direct debit authorization. It lets them take VAT payments directly from your bank account. It saves time, and helps you avoid late payments1.

      2. Collect VAT from customers

      You must charge VAT to all your German customers, and some of your EU customers.

      When to charge VAT ↓

      If you forget to charge your customers VAT, you must still pay VAT to the Finanzamt1. For example, if you make a 100€ invoice, and you forget to charge 19€ for VAT, the Finanzamt still collects 19€ from you. If you write incorrect invoices, you can lose money.

      3. Submit VAT returns

      If you charge VAT, you must submit VAT returns (Umsatzsteuervoranmeldung). They tell the Finanzamt how much VAT you owe them.

      There are 4 ways to make VAT returns:

      Frequency: How often you submit VAT returns depend on how much VAT you paid last year.1, 2

      VAT paid last yearWhen to submit VAT returns
      Under 1,000Never
      1,000€ to 7,500Every quarter
      Over 7,500Every month

      Due date: You must submit your VAT return before the 10th day of the next month1, 2. If that day is a Saturday, Sunday or public holiday, you have until the next business day1, 2.

      If you submit your VAT returns late, you pay a fine (Verspätungszuschlag). The fine is up to 10% of the VAT you owe, maximum 25,0001, 2.

      4. Pay VAT to the Finanzamt

      After you submit your VAT return, you must pay the Finanzamt by bank transfer. They will not send you an invoice; you must simply transfer the money1. If you gave the Finanzamt a direct debit authorization, they take the money automatically.

      If the VAT you paid is more than the VAT you charged, you get a refund from the Finanzamt1.

      Due date: The VAT payment is due on the same day as the VAT return: before the 10th day of the next month1. You have 3 more days for the bank transfer to go through1.

      Late submission example 1: You pay your March VAT on April 10. The payment goes through on April 13. You don't pay a fine, because you paid your VAT on time.
      Late submission example 2:
      You pay your March VAT on April 20. You pay a fine, because you paid your VAT late.

      If you submit your VAT return on time, but you payment is late, you get a fine (Säumniszuschlag). The fine is 1% of the VAT you owe for every month you wait1.

      Late payment example: You owe the Finanzamt 5,300€. You pay your VAT 2 weeks late. The fine is 53€ (1% of 5,300€)1.

      5. Submit a yearly VAT declaration

      You must also make a yearly VAT declaration (Umsatzsteuererklärung). If you forgot to declare something in your VAT returns, you can make corrections in your VAT declaration1.

      Due date: May 31 of the next year1. If your tax advisor submits it for you, they have until September 301.

      If you submit your VAT declaration late, the fine is the same as for a late VAT return: up to 10% of the VAT you owe, maximum 25,000€.

      When to charge VAT

      If you are a small business (Kleinunternehmer), you never charge VAT.

      Otherwise, it depends on what you sell, and where your customer is.

      Use the VAT helper to decide how much VAT to charge.

      VAT for customers in Germany

      Charge VAT. If you sell goods of services to customers in Germany, you must charge 19% VAT.

      Some products and services have a reduced VAT, or not VAT.

      VAT for customers in the EU

      It depends. If your customer is in another EU country, it's more complicated1:

      • If you sell to another business (B2B)
        You charge 0% VAT, and issue a reverse charge invoice1. — How reverse charge works
      • If you sell to a private customer (B2C)
        • If you sell goods
          It depends on how much B2C revenue you get from other EU countries:
          • Less than 10,000€ in EU sales
            You charge the German VAT rate, 19%.
          • More than 10,000€ in EU sales
            You charge the VAT rate in the customer's country. You must register your business for VAT in the customer's country, or open a One Stop Shop. — What is a One Stop Shop?
        • If you sell services
          You usually charge the German VAT rate, 19%, but there are exceptions:
          • Broadcasting, telecommunication and electronically-supplied services
            You charge the VAT rate in the customer's country58. This includes most sales of digital services: software, films, web hosting, courses…II

      If your customer is in another EU country, your invoice must contain specific information.

      VAT for customers outside the EU

      Don't charge VAT. If your customer is outside the European Union, you must not charge VAT1.

      For example, if you sell goods or services to customers in the United States, you must not charge VAT1.

      Need help?

      Where to find help ➞ Business questions