Germany VAT

1. Value Added Tax (Umsatzsteuer):

• Standard and Reduced Rates:
  • The standard VAT rate in Germany remains 19%.
  • A reduced rate of 7% applies to specific goods and services, primarily food and agricultural products.
  • It is very important to get the most up to date information regarding these rates, as they are subject to change.
• Scope of Taxation:
  • VAT is levied on goods and services supplied within Germany and on imports.
  • Exports to countries outside the EU are generally exempt.
• VAT Reporting and Registration:
  • VAT returns are typically filed monthly or quarterly, depending on the annual turnover.
  • Small businesses benefit from special provisions.
  • The threshold for mandatory VAT registration is a turnover exceeding €22,000 in the previous calendar year.
  • Foreign businesses that conduct business within Germany, must register for VAT.
• E-commerce VAT Rules:
  • The EU's e-commerce VAT rules will continue to impact online businesses operating in Germany. Foreign investors involved in e-commerce should ensure compliance with these rules.

2. Inheritance and Gift Tax (Erbschaftsteuer und Schenkungsteuer):

• Tax Principles:
  • Germany applies inheritance and gift tax with similar principles.
  • Tax applies to worldwide assets if the donor/testator or the recipient/heir is a German resident.
  • If neither party is a German resident, tax applies only to German-located assets.
  • Foreign tax paid may be credited against German tax, especially under double taxation treaties (e.g., with the U.S., Switzerland, Austria).
• Taxpayer Groups:
  • Recipients are categorized into three groups:
    • Group 1: Spouse, children.
    • Group 2: Parents, grandchildren.
    • Group 3: All others.
• Tax Rates and Exemptions:
  • Tax rates range from 7% to 50%, depending on the recipient group and asset value.
  • Exemptions are available based on family relationships.
  • It is very important to get the most up to date information regarding the tax rates, and exemptions, as they are subject to change.

3. Real Estate Transfer Tax (Grunderwerbsteuer):

• Tax Scope:
  • This tax is levied on the transfer of real estate located in Germany.
  • It also applies to the acquisition of at least 90% of the shares in a real estate-owning company.
• Tax Rates:
  • The tax rate varies by federal state, ranging from 3.5% to 6.5%.
  • The taxes are paid to the local authority where the property is located.
• Key Considerations:
  • It is very important to get the most up to date information regarding the tax rates, as they are subject to change by the local authorities.

Key Considerations for Foreign Investors:

• Compliance:
  • Ensure compliance with German tax laws and regulations.
• Documentation:
  • Maintain thorough records of all transactions.
• Professional Advice:
  • Seek advice from German tax professionals.
• Double Taxation Treaties:
  • Utilize double taxation treaties to minimize tax liabilities.
• Up to date information:
  • German Tax law is subject to change, so ensure you have the most current information.
• Language:
  • All official documentation will be in german.