How VAT works in Germany
In Germany, VAT โ known as Umsatzsteuer or Mehrwertsteuer โ is charged at a standard rate of 19% and a reduced rate of 7% for essentials like food, books, and public transport. The Federal Central Tax Office (Bundeszentralamt fรผr Steuern) oversees VAT for cross-border activity, while local tax offices (Finanzamt) handle domestic registration.
VAT rates
| Type | Rate | Applies to |
|---|---|---|
| standard | 19% | Most goods and services |
| reduced | 7% | Food, books, public transport |
| zero | 0% | Intra-EU exports |
Do I need to register for VAT in Germany?
Registration threshold: โฌ22,000 annual taxable turnover.
Small businesses (Kleinunternehmer, "small entrepreneur") with turnover below โฌ22,000 in the previous year and projected below โฌ50,000 this year can opt out of charging VAT. Otherwise, register through your local tax office (Finanzamt) or via ELSTER online.
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Common mistakes
- Missing the small-business (Kleinunternehmer) election when starting out
- Charging 19% on items that qualify for the 7% reduced rate
- Not validating EU customer VAT IDs (VIES) for reverse charge
- Late ELSTER (electronic tax filing) submissions trigger automatic penalties
FAQs
What is the German VAT rate?โ
19% standard, 7% reduced for food, books and public transport.
What is the Kleinunternehmer rule?โ
The Kleinunternehmer (small business) rule lets businesses with turnover below โฌ22,000 opt out of charging VAT.