A foreign company that carries out transactions subject to German VAT in Germany must, in certain cases, settle a Tax representation in Germany in order to carrying out the formalities incumbent on that company.
Tax representation in Germany and VAT registration:
To be able to carry out its activity in the European Union as a company, it is mandatory to obtain an intra-community VAT number in the country of destination of the taxable transactions.
A foreign company carrying out taxable transactions in Germany must be identifiable, i.e. register with the German tax authorities in order to obtain an intra-Community VAT number and must declare the latter, even in the absence of turnover.
Transactions considered taxable in Germany:
- Purchases from German suppliers with direct delivery to German customers, whether they are subject to VAT or not
- Intra-Community acquisitions to consignment stock in Germany
- Distance selling to individuals for more than €10,000 per year (since 1 July 2021)
- Direct imports into Germany
- Intra-Community deliveries from Germany to another EU country or exports to a third country
The tax representative of the foreign company takes care of the administrative formalities and tax declaration of its taxable transactions in Germany :
- VAT registration
- Submission of VAT returns
- Submission and follow-up of refund requests
- Submission of Intrastat declarations
- Communication with local tax authorities
Rules of tax representation in Germany:
- The standard VAT rate in Germany is 19%.
- The reduced rate of 7% applies to certain expenses (tickets to sporting events, social works, art and collectibles, wood for industrial use)
- For B2C activities, the threshold for distance selling is set at €10,000
- As in all European countries, VAT must be declared even in the absence of turnover from the moment you are registered.
VAT registration in Germany is required for the following taxable transactions:
- Import of goods into Germany from a non-EU country
- Exports from Germany to a country outside the EU
- Purchases of goods delivered to Germany from an EU Member State
- Sales of B2B goods from Germany to an EU Member State
- B2C sales of goods and services to German individuals, including via an online sales platform.
The lack of registration is not to be taken lightly : In addition to no longer being able to recover VAT, the German tax authorities impose heavy penalties (questioning of exemptions, additional taxes, penalties, interest on late payments, etc.).
For any intra-Community transaction of goods or services to a customer from an EU country, the company via its tax representative must send to the Federal Central Tax Office (Bundeszentralamt für Steuern – BZSt) an EC Sales List (ESL) which contains the details of the customers, the value of the goods or services as well as the country code of the customers.
This information allows the tax authorities to ensure that activities are correctly declared and that intra-Community VAT rules are respected.
The ESL declaration is mandatory from the 1st euro and must be sent to the local tax administration at the same time as the VAT return.
Failure to submit ESL returns deprives the undertaking of the exemption applicable to intra-Community supplies.
Intrastat declarations are also compulsory. In Germany, they are controlled by the statistical authority Destatis. They are submitted monthly, on the 10th working day of the month following the reporting period.
In Germany, the IDEV (Internet Datenerhebung im Statistischen Verbund) portal is the favorite method to send the declaration. The Umsatzsteuer-Identifikationsnummer (local VAT number) is required to make the deposit.
German Intrastat declarations must be submitted as soon as the value of intra-Community transactions reaches the threshold set by the Intrastat Customs Code:
- Shipping threshold: €800,000
- Threshold at introduction: €500,000
Failure to file returns may result in penalties. Setting up a Tax Representation in Germany grant you the respect of local rules.