VAT is an abbreviation that stands for Value Added Tax, and is common in various European countries and regions, with Germany as no exception. Germany introduced the VAT in 1968, and it is still enforced for domestic and foreign companies today. The rules and regulations surrounding the German VAT are primarily based on the overarching European Union VAT regulations and directives. The tax itself is administered and monitored by the country’s Ministry of Finance.
Foreign or international companies, otherwise known as ‘non-resident’ traders that are looking to provide goods, services and/or products in Germany are required to register for German VAT, whether providing goods to consumers directly or to other businesses within the country. Foreign Companies VAT Registration in Germany is not an overly daunting task but does require that companies follow the compliance rules associated with the VAT diligently, and ensure that they pay their VAT and other tax-related dues.
Foreign Companies VAT Registration in Germany is required in a few situations, and companies must register with local tax authorities. These situations include cases whereby if foreign traders are importing goods into Germany (exporting from their local country), this can be from another EU country or outside the EU entirely, the same requirement to register applies. Also, if a company or individual is looking to move goods between Germany and other EU member states as sales or purchases, there is a requirement to register with tax authorities. Further, if a company is looking to buy or sell any goods at all, over any period of time in Germany, this registration is also required. Holding goods in stock, or consignment stock requires VAT compliance and certification as well. Another situation is when organising a trade show, a live exhibition or any event, in Germany, this can include training as well. Finally, selling or buying goods online to German consumers or from German businesses. This situation is becoming increasingly complex, and the regulations for online sellers, and anyone involved in the online selling process, are changing rapidly, so it is essential to stay informed, to ensure compliance with VAT requirements and registration requirements.
Despite the above, the Reverse Charge process, as it is formally known and referred to, allows companies to avoid registering for the VAT if they are providing services to local (i.e. German) companies. This came to be in 2010 when there were significant changes to the VAT rules.
Also, if the service is of electronic broadcast or telecom nature, then your company only has to register in one EU country, and this will allow you access to do business in most other EU countries as well. There are other exemptions, and situations, where registration may not be required, so be sure to read all documentation on eligibility, and the Reverse Charge, and similar systems.
For companies who do fall under the criteria or situations where they need to register or comply with VAT requirements, there are lots of resources online to help you understand the requirements, returns and process. It is recommended to read and follow the VAT system, rules and requirements thoroughly, before undertaking any business activities in Germany. Also, legal review and assistance can help make the process more accessible, and more understandable, and can bring an overall sense of security, as there are many lawyers and legal professionals, who are trained and specialise in the VAT, and international/EU business and tax sector.
So, if you are required to register, what will you need and what is the process?
Firstly, the purpose of registering is to receive a German VAT number and registration. To obtain it make sure that you have:
- A VAT certificate to prove that your business is valid, and registered in another EU country, if applicable and appropriate. This helps confirm the legitimacy of your business, as well as being proof that your intentions are good, and your efforts have been successful elsewhere
- You will also need an extract from your home country’s national trade register. This is another means of proving that your business is legitimate and that you genuinely offer the goods or services as described. It also helps German tax authorities understand your business structure, as well as get a sense for your financial stability and capabilities
Many companies, unfortunately, find out the hard way, that the forms and documents you are required to fill out to apply for your VAT number are often in German, and the authorities prefer them to be this way so that nothing is lost in translation when they review it. For this reason, it is reiterated that legal counsel can be a tremendous help, especially someone familiar with the German VAT system and requirements. If you are able to complete the documents successfully, you are on the right path to being a successful part of the German business network!
If you need further help with German VAT registration, give our experienced advisers a call or fill in the form below for free and no obligation advice.