The Essential VAT Guide For Online Retailers Selling in Germany (2021 Update)
May 31, 2015 in Ecommerce, German VAT, International VAT, News, VATThe Essential VAT Guide for Online Retailers Selling in Germany
(2021 Update)
- As one of the largest economies in the world and the largest ecommerce market within the EU, Germany offers great expansion opportunities for online businesses. With the German ecommerce market predicted to grow by 11% in 2021 to $111 billion, there’s no better time to start selling in Germany. Our German-speaking tax experts have built great relationships with the DE Tax Authorities, meaning you can navigate the market with industry-leading guidance.
Before you start selling in Germany, it’s important to be aware of the VAT implications. As one of our most popular EU VAT registrations, here’s what we recommend you should look out for.
In this guide we will cover:
Quick facts
- VAT or "Umsatzsteuer"(UST) is charged at Standard Rate (19%), Reduced Rate (7%) or Zero-Rated.
- Foreign companies can register for VAT in Germany without the need to form a local company.
- VAT registration can take up to 16 weeks with the German Tax Authorities, so it's important to bear this in mind when planning your expansion.
What are the new distance selling rules in Germany?
Since the EU VAT reforms in July 2021, rules surrounding distance selling have changed. The general principle of these changes is to require VAT to be due wherever customers are based. This means that both EU and non-EU businesses must be VAT registered from first sale when trading cross-border.
Selling from outside the EU into Germany
For non-EU businesses selling to German customers new VAT rules apply; if your goods are shipping from outside of the EU at point of sale and are in consignments valued at less than EUR 150, you will be eligible for the IOSS (Import One Stop Shop) Scheme. This means you will charge VAT at the point of sale and account for the importation of low-value goods and report all your cross-border sales via a single monthly VAT return. IOSS also enables you to expedite the customs process as no VAT or duties are due when clearing customs, so goods reach their destination faster.
For non-EU businesses selling to Germany whose consignments exceed EUR 150 in value or those that choose to not opt into IOSS, you will need to VAT register in Germany and charge the applicable rate at checkout (standard rate – 19%). Standard customs procedures will also apply to these consignments on arrival in Germany.
Selling from inside the EU into Germany
For EU-based businesses, distance selling thresholds have changed also. Under the new rules, EU businesses that do not earn over EUR 10,000 in annual sales will be able to charge the rate of VAT where they are based. However, once this threshold has been passed, business will need to apply the correct rate of VAT where their customers are based. Non-EU businesses do not have a threshold to exceed and should be charging the local rate of VAT where the end customer is located from the very first sale.
If you sell goods into Germany from another country within the EU, you are eligible for the OSS (One Stop Shop) Scheme. This enables you to report all your intra-EU distance sales through a single quarterly VAT return. You can choose a country to register through with OSS, but keep in mind you will need a VAT registration wherever you hold stock and sell domestically.
If you sell digital goods or services from within the EU, you will also be able to report these through OSS.
Who's responsible for VAT when selling on a marketplace in Germany?
The way marketplaces are required to handle EU VAT has also changed. For businesses who sell via online marketplaces, in certain scenarios, you will not be considered the deemed supplier and so the marketplace must take full responsibility for charging and collecting VAT on your behalf.
If, however, you sell on both a marketplace and your own website to German customers, you will be expected to collect and report VAT for any sales made on your website and charge the correct VAT rate.
What if I use a fulfilment centre in Germany?
If you use a fulfilment centre in Germany to house your stock to supply to your private customers, this triggers an immediate need to VAT register in Germany – there is no threshold to exceed. Once registered, you will be obligated to file periodic VAT returns.
What are the VAT reporting requirements in Germany?
VAT returns in Germany are required monthly. The deadline for monthly returns is the 10th day of the month following the reporting period. VAT returns can also be quarterly if turnover is below EUR 7,500 per annum.
For businesses using IOSS, VAT returns will be required on a monthly basis via Germany’s online portal. In order to use IOSS, non-EU businesses will need to appoint an indirect representative for importation purposes.
For businesses using OSS, VAT returns will be required quarterly also via Germany’s online portal.
Remember, if you hold stock within an EU member state and make both domestic and cross-border sales, you will need to account for these transactions through separate VAT returns. The OSS Scheme can only be used to report cross-border sales and so will not be applicable to domestic transactions. Any domestic sales will require a local VAT registration and return.
Do I need to file Intrastat Declarations in Germany?
In addition to VAT returns, if your turnover exceeds the Intrastat Declaration threshold (in Germany it is EUR 800,000 for arrivals and EUR 500,000 for dispatches) you will be obligated to file monthly Intrastat declarations as well as your monthly VAT returns.
Intrastat Declarations are obligatory statistical returns required by the EU to monitor trade between the EU member states.
What are the invoicing requirements in Germany?
For any online business registered for VAT in Germany, you must provide each customer with a full invoice stating exact values and rates of tax. This is an essential requirement that provides clarity to the customer when purchasing from your business.
What are the VAT penalties in Germany?
Failure to comply with local VAT regulations can result in penalties and interest being applied by the Germany Tax Authority. Please be aware the European tax authorities are becoming more proactive in searching for non-compliant online retailers. They have set up mutual co-operation with each other and they share data.
In Germany, there are no penalties for failing to register for VAT in time. However, a company may incur late payment penalties, late filing penalties and interest on any outstanding VAT.
What are the next steps?
If you would like to discuss your VAT compliance or think you may need to register for VAT in Germany, fill out the form below and one of our international compliance experts will be happy to help you.
As the German Tax Authorities take compliance very seriously, and the wait time for a VAT registration can be quite long, it’s important to talk to a VAT expert as soon as possible when selling into Germany.
In the meantime, for more information about the 2021 EU VAT reforms and how to trade compliantly within the EU in 2021, you can download a copy of our free eBook, Unpacking the EU VAT Package.
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