Value added tax — Umsatzsteuer in German — is a consumption tax on goods and services. For businesses in Germany it becomes mandatory once certain revenue thresholds are reached. This guide covers everything that matters.
VAT rates in Germany
Germany has two rates:
| Rate | Percentage | Applies to | |---|---|---| | Standard rate | 19% | Most goods and services | | Reduced rate | 7% | Food, books, public transport, hotels |
Who needs a VAT ID?
Small business scheme (§19 UStG)
Entrepreneurs with annual revenue up to €25,000 (previous year) and up to €100,000 (current year) can use the Kleinunternehmerregelung — and don't charge VAT on their invoices. (Thresholds apply since the reform of January 1, 2025.)
Advantage: Less bureaucracy, simpler bookkeeping.
Disadvantage: No input tax deduction.
Standard taxation
Once you exceed the thresholds (or opt out of the small business scheme), you are fully liable for VAT and receive a VAT ID (Umsatzsteuer-Identifikationsnummer).
Companies trading within the EU must register regardless of revenue.
Applying for a VAT ID
Required documents
- ID card or passport
- Articles of association (for GmbH/UG)
- Commercial register extract
- Description of business activity
- Bank details
Where to apply
- Domestic companies: Through the tax office (often automatic with trade registration)
- Foreign companies (EU): Through the Federal Central Tax Office (BZSt) via the BZStOnline portal
- Non-EU companies: Must appoint a fiscal representative in Germany
VAT advance returns
Frequency
- Monthly: If the previous year's VAT liability exceeded €7,500
- Quarterly: For a liability of €1,000–€7,500
- Annually: For a liability below €1,000
Filing
Exclusively electronic via ELSTER (Germany's electronic tax filing system). Deadline: the 10th of the following month (with a permanent extension: the 11th of the month after next).
Retention requirement: All records must be kept for 10 years.
Input tax deduction
As a VAT-registered business, you can deduct the VAT shown on incoming invoices as input tax from your own VAT liability.
Requirement: A proper invoice under §14 UStG containing all mandatory details.
E-commerce and OSS
For online sellers shipping to multiple EU countries, the One-Stop-Shop (OSS) scheme has applied since July 2021:
- No obligation to register in every single EU country
- One central declaration via the BZSt in Germany
- Applies from the first euro of cross-border EU sales (distance selling thresholds were abolished)
Consequences of non-compliance
Failing to meet VAT obligations leads to:
- Late filing surcharges (up to 10% of the tax due)
- Interest on back payments (1.8% per year)
- Repeated violations: criminal consequences
Bottom line
VAT is mandatory for most businesses in Germany — and non-compliance is expensive. With the right tax advisor or a digital tax service, your VAT returns run automatically and error-free.