VAT, GST and Sales Tax in Germany

Summary

Name of the tax Value-added tax (VAT)
Local name Umsatzsteuer/Mehrwertsteuer
Date introduced 1-Jan-68
Trading bloc membership European Union (EU) Member State
Administered by German Ministry of Finance (http://www.bundesfinanz ministerium.de)
VAT rates
Standard 19%
Reduced 7%
Other Exempt and exempt with credit
VAT number format DE123456789 (DE+9 digits)
VAT return periods Monthly or quarterly and/or annual returns
Thresholds
Registration None
Distance selling EUR100,000
Intra-Community acquisitions EUR12,500
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Germany by a taxable person
  • The intra-Community acquisition of goods from another EU Member State by a taxable person (see the chapter on the EU)
  • Reverse-charge supplies, including supplies of services and sup­plies of goods with installation services
  • The self-supply of goods and services by a taxable person
  • The importation of goods from outside the EU, regardless of the status of the importer

For VAT purposes, the territory of Germany does not include the Island of Helgoland, the territory of Buesingen and a free zone of control type I, as defined in Article 1 (1), first sentence of the Customs Administrative Act; this mainly covers the free ports of Bremerhaven and Cuxhaven, as well as certain other special ter­ritories. Effective 1 January 2013, the free zone territorial excep­tion no longer applies to the port of Hamburg.

The rules regarding the taxation of services have been signifi­cantly amended, effective from 1 January 2010, under the so-called “VAT Package Amendments.” Under the general rule, services rendered to taxable persons are taxable where the recipient is resident (many exceptions apply). Consequently, ser­vices rendered for foreign businesses are taxable in their home countries instead of Germany.

Who is liable

A taxable person is any business entity or individual that inde­pendently carries out any economic activity in any place.

No VAT registration threshold applies in Germany. A taxable person that begins an activity in Germany must notify the German VAT authorities of its liability to register.

The following two distinct types of numbers are used in Germany:

  • General tax number (Steuernummer)
  • VAT Identification Number (USt-IdNr.)

The tax number is the number under which the taxable person is registered at the local tax office that is responsible for the per­son’s tax affairs. The tax authorities use the tax number for inter­nal management and coordination purposes. The tax number must be used for all preliminary VAT returns, annual VAT returns and all correspondence with the local tax authority.

On receipt of the tax number, a taxable person may apply to the Federal Office of Finance in Saarlouis for a VAT Identification Number. This number is used for intra-Community transactions.

Group registration. Germany allows group registration for subsid­iaries that are “financially, economically and organizationally integrated” into the business of a parent entity. The following general conditions apply:

  • The parent (or controlling) member of the VAT group may be any type of legal entity, including a corporation, a general part­nership or a sole entrepreneur.
  • A subsidiary (or controlled) member of a VAT group must be a corporation or — according to recent jurisdiction — a general partnership. National jurisdiction has positively admitted only general partnerships fulfilling certain requirements, though. A decree of the tax authorities on whether they accept a general partnership as a controlled member of a VAT group has not been issued yet. A sole entrepreneur is ruled out.

The VAT authorities apply the following criteria to determine whether entities are eligible for integration:

  • “Financial integration” means that the parent has the majority of voting rights in the subsidiaries.
  • “Economic integration” means that the subsidiaries act like departments of one entity or like divisions with respect to the overall business of the group.
  • “Organizational integration” exists if the parent has the means to exercise management power in the subsidiaries. For example, this requirement is met if the parent and the subsidiary have the same person acting as the Managing Director, whereas legisla­tion requires this person to be employed at the parent and not at the subsidiary.

If the integration conditions are met, the subsidiaries and the par­ent are automatically treated as a group for VAT purposes. The effect of grouping is that the subsidiary is no longer considered to be an entrepreneur or separate taxable person. As a result, intra-group transactions are outside the scope of VAT and accord­ingly, no VAT is charged. The subsidiary is no longer required to file separate VAT returns and its transactions are reported through the parent’s VAT return. These effects apply only to domestic sup­plies between the group entities (that is, supplies within the scope of German VAT). In addition, the effects of the VAT grouping are limited to Germany.

VAT grouping does not apply to certain intra-Community com­pliance obligations (see Section J). Each subsidiary must have its own separate VAT Identification Number and must file its own European Sales List, if it carries out intra-Community supplies. Intrastat returns may be filed either on an aggregate group basis by the parent or by each subsidiary separately.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Germany. A non-established business is not required to register for German VAT if all of its supplies are covered by the reverse-charge procedure (under which the recipient of the supply must self-assess VAT). The reverse-charge procedure applies to most transactions. It does not apply to supplies of goods located in Germany (except supplies of installed goods) or to supplies of goods or services made to private persons. In principle, if the reverse charge does not apply, a non-established business must register for German VAT.

Tax representatives. In principle, a non-established business that is required to register for VAT in Germany may not appoint a tax representative. A tax representative may be appointed only if the non-established business does not have any German VAT to reclaim and exclusively makes supplies that are either exempt from German VAT or exempt with credit.

Reverse charge. Applying the reverse-charge mechanism shifts the liability for payment of the tax from the supplier to the recipient of the supply. The recipient must self-assess the VAT due.

The reverse-charge procedure applies in principle to the follow­ing supplies and services (if further criteria are met):

  • Services and the supply of goods with installation provided by non-established businesses
  • Certain supplies in connection with immovable property
  • Certain supplies in connection with the real estate transfer tax law
  • Certain supplies of gas and electricity
  • Goods supplied as part of the execution of security outside of an insolvency procedure
  • Supply of rights to emit greenhouse gases
  • Certain supplies of heat and cooling
  • Supply of scrap and discarded metal as defined by a special annex
  • Facility cleaning under certain conditions
  • Supplies of integrated circuits, mobile phones, tablet computers and games consoles for a remuneration of EUR5,000 or more
  • Supplies of base metals as defined by a special annex

The reverse-charge procedure does not apply to certain supplies of passenger transportation or to services with respect to fairs or exhibitions.

The recipient is allowed to reclaim the reported VAT in the same preliminary VAT return as input VAT to the extent they are allowed for input VAT deduction. The supplier has to issue invoices without German VAT. Therefore, the taxable person only invoices the net amount. Furthermore, it is mandatory for the entrepreneur to state on the invoice that the reverse charge applies and that the recipient is liable for German VAT with the fol­lowing phrase: “Steuerschuldnerschaft des Leistungsempfängers.”

Registration procedures. There is no VAT registration threshold. All taxable persons that carry out taxable transactions in Germany have to register for VAT purposes in Germany.

It normally takes four to six weeks to obtain a (general) tax num­ber from the responsible local tax authority and afterwards the VAT ID number for intra-Community transactions or services supplied where received from the Federal Central Office for Taxes (Bundeszentralamt für Steuern).

The entrepreneur can apply for the (general) tax number at the responsible local tax authority by explaining in writing why he needs to register for VAT in Germany. No special form is required, but the entrepreneur generally has to complete a ques­tionnaire issued by the relevant local tax authority. Furthermore, he has to submit a certification of status of taxable person as well as an excerpt from his local trade register. Online registration is not possible.

Late-registration penalties. No specific penalty applies to late VAT registration in Germany. If, as a result of the late registra­tion, a taxable person submits VAT returns belatedly, late-filing penalties may apply. Penalties are also charged for any late pay­ments of VAT. In addition, late filing and late payment of VAT may be regarded as a tax fraud.

Late-filing penalties may be assessed up to 10% of the VAT due, and late-payment penalties amount to 1% of the VAT due per month.

In the case of a voluntary disclosure to prevent punishment of tax fraud, a surcharge applies as follows:

  • 10% of the tax amount if the respective amount exceeds EUR25,000 up to EUR100,000
  • 15% if the amount exceeds EUR100,000 up to EUR1 million
  • 20% if the amount exceeds EUR1 million

Digital economy. There are no specific rules relating to the taxa­tion of the digital economy in Germany apart from, for example, specific rules for the place of the digital service and the Mini One-Stop Shop scheme.

Mini One-Stop Shop. Special rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. These services are taxed in the country where the consumer is established. EU taxable persons that supply electronic services have to charge VAT to nontaxable persons established anywhere in the EU, using the destination principle. EU suppliers are permitted to discharge their VAT obligations using a Mini One-Stop Shop scheme, which enables them to fulfill their VAT obligations (VAT registra­tion, reporting and payment) in their home country, including for services provided in other Member States where they are not established. Accordingly, EU suppliers are able to apply a simpli­fication measure similar to the one that is in place for non-EU providers of electronic services.

Deregistration. There is no special procedure or form required to deregister. The entrepreneur informs the tax office and states the reason for the deregistration.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to a rate of VAT.

The following are the two rates of VAT in Germany:

  • The standard rate at 19%
  • The reduced rate at 7%

The standard rate of VAT applies to all supplies of goods or services, unless a specific provision allows a reduced rate or exemption.

An option to treat specific VAT-exempt supplies and services as taxable supplies exists.

Examples of goods and services taxable at 7%

  • Books and newspapers
  • Cultural services
  • Food
  • Passenger transport (however, effective from 2012, transport by ship is subject to the standard rate of 19%)
  • Agricultural products
  • Hotel stays

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to German VAT and that do not give rise to a right of input tax deduction (see Section F). Some supplies are classified as “exempt with credit,” which means that no VAT is chargeable, but the supplier may recover related input tax. Exempt with credit supplies include exports of goods outside the EU and related services, and intra-Community supplies of goods (see the chapter on the EU).

Examples of exempt supplies of goods and services

  • Land and buildings
  • Financial transactions
  • Insurance
  • Education
  • Medical services

Option to tax for exempt supplies. For some VAT-exempt supplies, such as land, buildings and financial transactions, there is an option for the supplier to treat a transaction as taxable, and if certain requirements are met, related input tax can be recovered. The supply or service must be rendered to an entrepreneur for business purposes, and further requirements might apply.

Time of supply

In principle, German VAT payable is due on the 10th day follow­ing the end of the filing period (Voranmeldungszeitraum) in which the VAT falls due. A filing period may be a month or a quarter of the calendar year.

The VAT falls due at the end of the filing period in which a sup­ply takes place (tax point). However, some taxable persons are permitted to account for VAT on a cash basis (cash accounting). If cash accounting is used, the tax point is the end of the filing period in which payment is received.

Prepayments. The tax point for an advance payment or prepay­ment is the end of the VAT return period in which payment is received.

Reverse charge. The tax point for a supply taxed under the reverse-charge procedure (self-assessment by a German taxable person) is the end of the month following the month in which the supply takes place. If the supplier issues an invoice before this date, the tax point is the date on which the invoice is issued. For most services under the reverse-charge procedure, the tax point is the month in which the services are rendered, regardless of the date on which the invoice is issued. For most services under the reverse-charge procedure that last longer than a year, the tax point is once a year (for the yearly part of the service).

Intra-Community acquisitions. The tax point for an intra-Commu­nity acquisition of goods is the end of the month following the month when the acquisition occurred. If the supplier issues an invoice before this date, the tax point is the date on which the invoice is issued.

Imported goods. The tax point for imported goods is the date on which the goods clear customs or the date on which the goods leave a duty suspension regime and are released for free circula­tion. The date on which import VAT becomes due depends on how the goods clear customs. The following are the applicable rules:

  • If the goods are cleared without using a payment-simplification regime, in general, the import VAT payment is due within 10 days.
  • If the goods are cleared using a payment-simplification regime, payment is postponed for up to 45 days.

Cash accounting. Small businesses with a taxable turnover of not more than EUR500,000 in the prior year may account for VAT on a cash basis (Istbesteuereung). The same applies to small busi­nesses that have been exempted from the obligation to keep books and records (article 148 of the Fiscal Code) as well as to freelancers mentioned in article 18(1)(1) of the Income Tax Act. This method of VAT calculation must be approved by the tax office.

Continuous supplies of services. Continuous supplies of services are deemed to be rendered upon completion of delivery. If such services can be divided into parts and separate payments for these parts are agreed, such as monthly payments for an ongoing lease, VAT arises for these partial supplies.

Intra-Community supplies of goods. The tax point for intra-Com­munity supplies of goods is the end of the month in which the supplies were made. However, for intra-Community supplies a zero VAT rate (exempt with credit) is applicable.

Leased assets. For the lease of assets the rules for continuous supplies are applicable (please see above).

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for taxable business purposes (used for taxable (output) services or supplies). Exceptions to this rule exist. A taxable person generally recovers input tax by deduct­ing it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Germany, VAT paid on imports of goods and VAT self-assessed on the intra-Community acquisition of goods (see the chapter on the EU) and VAT on purchases of goods and services taxed under the reverse-charge procedure.

A valid tax invoice or customs document must generally accom­pany a claim for input tax.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes (for example, goods acquired for private use). The fol­lowing specific rules apply in Germany to the input tax deduction:

  • The 10% rule. If an asset is used for less than 10% business purposes, no input VAT recovery is allowed. This rule applies to all assets.
  • Private use. For corporations (for example, a GmbH or an AG) that are taxable persons, any purchase of goods or services is treated as being made for business purposes. Consequently, input VAT recovery is allowed in full. If the goods or services are used for private purposes, the legal entity is deemed to make a supply of goods or services and output VAT is due. However, if the taxable person already intends to use the goods or services for private purposes when he/she acquires them, the legislation does not grant input VAT recovery. Consequently, no output VAT is due upon use for private purposes.
  • Luxury goods and services. Input tax may not be deducted for some items of business expenditure. In general, if an item of expense is allowable for German income tax purposes, the input tax may be deducted.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Business gifts (if valued over EUR35)
  • Employees’ home telephone bills and private mobile telephone bills

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Hotel accommodation
  • Restaurant meals for employees on business trips
  • 100% purchase, lease or hire of cars by corporations, partner­ships or sole proprietors (with VAT chargeable on employee private use)
  • Advertising
  • Books
  • Transport services

Partial exemption. Input tax directly related to making exempt supplies is generally not recoverable. If a German taxable person makes both exempt and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.”

Exempt with credit supplies are treated as taxable supplies for these purposes.

The amount of VAT recoverable is calculated using the following two-stage calculation:

  • The first stage identifies the input VAT that may be directly allocated to taxable and to exempt supplies. Input tax directly allocated to taxable supplies is deductible. Input tax directly related to exempt supplies is not deductible (exceptions apply).
  • The second stage identifies the amount of the remaining input tax (for example, business overhead) that may be allocated to taxable supplies and recovered.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s (partial exemp­tion) recovery position in the VAT year of acquisition. However, the amount of input tax recovered for capital goods must be adjusted over time, if the taxable person’s partial exemption recovery percentage changes during the adjustment period.

In Germany, the capital goods adjustment applies to the follow­ing assets for the number of years indicated:

  • Land and buildings (adjusted for a period of 10 years)
  • Other assets (adjusted for a period of five years) The adjustment is applied each year following the year of acqui­sition, to a fraction of the total input tax (1/10 for land and build­ings and 1/5 for movable capital assets). The adjustment may result in either an increase or a decrease of deductible input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared with the year in which the capital goods were acquired.

The above provision also applies to current assets and services.

For goods that are used only once, the adjustment takes place at the time the transaction (for example, their resale) is carried out. No adjustment period applies.

The initial input VAT deduction for services that are not performed on goods but that are used for transactions within the scope of VAT (for example, software licenses, cleaning services, consult­ing services for a business concept and prepayments for long­term leasing) must be adjusted to the extent that the initial deduction ratio changes.

For goods that are integrated in other goods and for services performed on goods, the capital-goods scheme applies in the same way; that is, the additional supply has its own capital-goods adjust ment scheme, but the adjustment period is the same as the period that applies to the basic good (for example, if new win­dows are added to a house, the adjustment period for the win­dows begins with their first use and the adjustment period lasts for 10 years, because the windows become part of the immovable property).

No adjustment need be made in the following situations:

  • The total input VAT on the purchase or the production cost of the goods or service is less than EUR1,000.
  • The correction amount for the year does not exceed EUR1,000, and the adjustment is less than 10%.

Refunds. If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person has an input tax credit. The credit is generally refunded. Exceptionally, the tax authorities may make the refund conditional on the taxable person making a deposit (for example, a bank guarantee) which is subsequently refunded.

Preregistration costs. Input VAT on costs incurred before regis­tration is deductible. Status as a taxable person does not depend on registration. However, recovery of input VAT on such costs requires (retroactive) registration.

Write-off of bad debts. A taxable person is entitled to recover any VAT already accounted to the tax authorities in respect of unpaid debts. VAT on a bad debt is recovered at the VAT rate that was applied to the original transaction.

Noneconomic activities. Noneconomic activities — supplies of goods or services not related to a business purpose — are not subject to German VAT. Therefore, the recipients are not entitled to an input VAT deduction.

Recovery of VAT by non-established businesses

Germany refunds VAT incurred by businesses that are neither established in Germany nor registered for VAT there. For busi­nesses established in the EU, refund is made under the terms of the EU Directive 2008/9/EC; see below). For businesses established outside the EU, refund is made under the terms of the EU 13th Directive. In accordance with the terms of the 13th Directive, refunds to non-EU businesses are made on the condi­tion of reciprocity. The German VAT authorities have published a list of countries to which refunds are granted and a list of those to which they are not granted.

A non-established business is generally allowed to claim German VAT to the same extent as a VAT-registered business. However, businesses established outside the EU may not recover German VAT on fuel costs.

For the general VAT refund rules of the EU refund schemes, see the chapter on the EU.

Refund application for non-EU businesses. The deadline for refund claims by non-EU businesses is 30 June of the year following the year in which the invoice was received by the claimant. The date of supply may be earlier than the date of the invoice. The claims deadline is strictly enforced.

Claims must be submitted in German. The application for refund must be accompanied by the appropriate documentation (see the chapter on the EU). The claimant must submit a Certificate of Taxable Status, which confirms that the claimant is registered as a taxable person under a tax number. The certificate may not be older than one year. In addition, the German VAT authorities may send an additional questionnaire, to confirm that the claimant should not be registered for VAT in Germany, as opposed to using the EU 13th Directive procedure. According to the tax authori­ties, the application must be signed by the legal representative and other representatives are not allowed to sign the application. Consequently, they may reject an application on this ground.

For all claimants, the minimum claim period is three months, while the maximum period is one year. The minimum claim for a period of less than a year is EUR1,000, while the minimum amount for an annual claim or for the remainder of a year is EUR500.

Applications of non-EU businesses for refunds of German VAT must be sent to the following address:

Bundeszentralamt für Steuern

Dienstsitz Schwedt

Passower Chaussee 3b D-16303 Schwedt/Oder Germany

Refund application for EU businesses. The deadline for refund claims of EU businesses is 30 September of the year following the year in which the invoice was received by the claimant. The date of supply may be earlier than the date of the invoice. The claims deadline is strictly enforced.

EU businesses must file their refund claims to the competent tax authorities in their home states via an electronic form. These tax authorities pass on the form to the German Federal Tax Office (Bundeszentralamt für Steuern, or BZSt). The language on the electronic form is the language of the Member State where the claimant is established. Any further correspondence with the BZSt must be completed in German. The minimum value of a claim is EUR400 and the minimum value for annual claims (or the remainder of the year) is EUR50. The original VAT invoices no longer need to be attached to the claims. However, copies must be attached electronically if the net amount is EUR1,000 or more or if the net amount for fuel is EUR250 or more. The original invoices must be retained because the BZSt may view the original invoices or copies of them under certain circum­stances. The BZSt must generally repay VAT within four months after the date on which the claim was submitted for refund. The refunded amount yields interest of 0.5% per month, beginning generally four months and 10 work days after the claim is received by the BZSt.

A qualified electronic signature is required for electronic returns and claims to a German tax authority. This rule applies to the refund claims described above.

Invoicing

VAT invoices and credit notes. A German taxable person must generally provide VAT invoices for supplies made to other tax­able persons and to legal entities, including exports and intra­Community supplies. This obligation generally does not exist for supplies that are VAT-exempt. Invoices are not automatically required for supplies made to private persons. A German taxable person is required only to issue invoices to private persons for certain supplies in connection with real estate.

Invoices must be issued within six months. Invoices for intra­Community supplies as well as services subject to reverse charge and rendered by taxable persons resident in the EU must be issued within 15 days following the month in which said supplies or services have been rendered.

Taxable persons must retain invoices for 10 years. Private persons who receive invoices for certain supplies in connection with real estate must retain the invoices for two years. Otherwise, private persons are not required to retain invoices.

However, all aforementioned retention periods may be extended under certain conditions.

A VAT invoice is required to support a claim for input tax deduc­tion or a refund under the EU refund schemes (see above and the chapter on the EU).

A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply. It is also possible to cancel an incorrect invoice and issue a revised one.

For intra-Community supplies of goods and exports, the invoice must include the statement that the supply is VAT-free. In addi­tion, the customer’s valid VAT Identification Number (issued by another EU Member State) must be mentioned in the invoice for all intra-Community supplies of goods.

Electronic invoicing. Electronic invoicing in line with EU Directive 2010/45/EU is permitted.

Proof of exports and intra-Community supplies. VAT is not charge­able on supplies of exported goods or on the intra-Community supply of goods (see the chapter on the EU). However, to qualify as VAT-free, exports and intra-Community supplies must be sup­ported by evidence that proves the goods have left Germany.

The Automated Tariff and Local Customs Clearance System (ATLAS) proof of export is considered to be the standard docu­mentary proof. Alternative proof, such as bills of lading, airway bills or freight forwarder certificates, is accepted only if an export has not been declared in the electronic ATLAS procedure or if, in special cases, the electronic export procedure could not be completed as required.

For intra-Community supplies, the standard proof — the so-called Gelangensbestätigung (confirmation of arrival) — is required. The confirmation must contain the following informa­tion:

  • The name and address of the customer
  • The amount and customary description of the supplied goods
  • In case of transport by the supplier or on behalf of the supplier or customer, the place and date of receipt of the delivered goods in another EU Member State
  • In the case of transport by the customer, the date and place of the end of the transport in another EU Member State

Other types of proof are allowed. However, the tax authorities are more likely to challenge alternative proofs than to challenge the Gelangensbestätigung.

Foreign-currency invoices. If a German VAT invoice is issued in a foreign currency, the value must be converted to euros (EUR) using an official exchange rate. The following conversion rates may be applied:

  • The actual bank-selling rate for the date of the supply (not the date of the invoice). The rate used must be evidenced by docu­mentation issued by the bank (this must be allowed by the German tax authorities).
  • The average monthly exchange rates published by the Federal Ministry of Finance shortly after the end of the month.

German law provides that the use of the official Ministry of Finance rates is the standard method of currency conversion for VAT pur­poses. Alternatively, the tax authorities may accept the use of bank selling rates by a taxpayer. However, neither the law nor any official guidelines specify how this acceptance is to be achieved. In particu­lar, no formal obligation to ask for approval exists. In practice, many companies simply use bank selling rates, while others inform their tax office in advance and ask for acceptance.

B2C invoices. Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. For fur­ther details of the VAT rules on electronic services in the EU, please refer to the European Union chapter.

VAT returns and payment

VAT returns. In general, preliminary VAT returns are filed quar­terly, but monthly returns must be filed if the VAT payable for the preceding year exceeded EUR7,500. However, if the VAT pay­able for the preceding year did not exceed EUR1,000, the taxable person may be exempted from filing preliminary returns. Newly established taxable persons must file monthly VAT returns for the first and second year of registration.

In general, preliminary VAT returns must be filed electronically.

The preliminary VAT return must be submitted by the 10th day after the end of the filing period. The VAT authorities must receive payment in full by the same day.

Because the regular filing deadline is relatively short, the VAT authorities allow a permanent one month filing and payment exten­sion on written application. However, taxable persons that must submit monthly preliminary VAT returns must pay a special prepayment equal to 1/11 of the preceding year’s VAT liability by the due date. This special prepayment is deducted from the VAT payable in the preliminary VAT return submitted for the month of December. Taxable persons that file returns on a quarterly basis are not required to make a special prepayment when they apply for a permanent filing extension.

Annual return. In all cases (monthly, quarterly or no preliminary returns), an annual VAT return must be submitted by 31 May of the year following the end of the VAT year. If a German tax advi­sor is engaged to prepare the VAT returns, the filing deadline is 31 December of the following year.

Annual tax returns must be filed electronically, together with a qualified electronic signature.

Special schemes. A special scheme applies to supplies of second­hand goods, e.g., if a commercial car dealer acquires a car from a private person. If a taxpayer sells goods or services he previ­ously purchased for taxable purposes in his business, he must charge VAT on the resale of such goods or services.

Electronic filing and archiving. In general, German VAT returns have to be filed electronically with authentication verified by an electronic certificate that the taxpayer receives by registering on the ELSTEROnline-Portal (http://www.elsterformular.de/).

Following the successful transmission of data, the transmission protocol needs to be printed out for the taxable person’s files in order to fulfill the documentation requirements of Sec. 147 AO (“Abgabenordnung”: German Fiscal Code).

Penalties

If VAT return liabilities are paid late, penalty interest is charged at a rate of 1% per month of the tax liability.

If a VAT return is filed late, a fine of up to 10% of the assessed tax amount may be imposed, up to a maximum of EUR25,000. In addition, an enforcement fine of up to EUR25,000 may be charged.

Further sanctions apply to tax fraud (please see above).

EU filings

Intrastat. A taxable person that trades with other EU countries must complete statistical reports, known as Intrastat, if the value of its sales or purchases exceeds certain thresholds. Separate reports are used for intra-Community acquisitions (Intrastat Arrivals) and intra-Community supplies (Intrastat Dis patches). Apart from deemed intra-Community supplies, any movement of goods to or from other Member States is also subject to Intrastat reporting (for example, goods sent for repair).

The threshold for Intrastat Arrivals is EUR500,000. The thresh­old for Intrastat Dispatches is also EUR500,000.

The Intrastat returns are generally filed monthly, but they may be submitted more frequently. The submission deadline is the 10th working day of the month following the month in which the intra­Community movement of goods takes place.

Penalties may be applied for late filing or failure to submit an Intrastat return.

EU Sales Lists. If a German taxable person carries out intra­Community supplies, it must submit an EU Sales List (ESL) in addition to its VAT return. No ESLs are required for periods in which no intra-Community supplies are made. ESLs must be filed for supplies of both intra-Community goods and intra­Community services. Under prior law, ESLs were required only for supplies of goods.

The filing period for the ESL for supplies of goods is changed from quarterly filing to monthly filing. For supplies of services, the filing period is quarterly. For entrepreneurs who must file monthly ESLs for supplies of goods, an option is available to also file monthly ESLs for intra-Community supplies of services.

In addition, the possibility of a one-month extension of the filing deadline is abolished. However, the due date for filing is changed from the 10th day of the following month to the 25th day of the following month.

A taxable person that is exempt from filing preliminary VAT returns and has taxable turnover not exceeding EUR200,000 a year may request permission to file annual ESLs if its intra­Community supplies do not exceed EUR15,000 and do not include supplies of new means of transport to purchasers using VAT Identification Numbers. In this case, the submission dead­line is the 10th day of the month following the calendar year.

Penalties may be imposed for late or inaccurate ESLs.