Value-added tax (Umsatzsteuer), also known as “Mehrwertsteuer” in Germany, is a consumption tax placed on products and services.
In Germany, there are two main VAT rates, 7% and 19%, read more about the different rates.
Who has to pay VAT?
Any self employed person that is not registered as a small business owner (Kleinunternehmer) must be registered for VAT.
If you are registered for VAT, you must charge your customers VAT for each service or product you are selling, as long that it is not exempt from VAT.
How do I calculate the VAT that I should pay?
Total VAT to be paid = (VAT received from customers) - (VAT paid on expenses)
In some periods, the VAT you pay on expenses will be higher than the VAT received from customers. In this case, you will be reimbursed by the financial authorities (Finanzamt).
Which VAT reports do I have to submit and when?
Umsatzsteuer-Voranmeldung (Advance VAT registration)
This report will summarise the VAT that you paid on expenses and the VAT received from customers during the report period, which is either monthly or quarterly.
The deadline for submitting the report is the 10th of the month following the report month or quarter.
You can also apply for an extension to the deadline, which will give you an additional month to prepare your report.
How often should I submit this report?
This depends on your previous year total VAT payment.
If it's more than 7.500€, the report should be sent monthly.
If it's more than 1.000€, the report should be sent quarterly.
If it's below 1.000€, you don't have to submit the advance VAT report, but you do have to submit the annual VAT return (see below).
Newly founded businesses will submit the report on a monthly basis for the first two years.
If you are confused, don't worry, the Finanzamt will inform you how often you should submit the report.
See the official Advance VAT registration form for 2020
Umsatzsteuererklärung (Annual VAT return)
Submitted yearly, after submitting your yearly profit and loss (EÜR) report.
The report is a summary of the VAT you have paid and received during the year, and in most cases almost identical to the advance registration reports sent throughout the year.
After submitting this report, you will either pay the Finanzamt or get reimbursed if the amount will differ from the VAT reports submitted during the year.
The deadline for submitting this report is the 31st of July of the following year, or the 28th of the second following year if the report is submitted by a certified tax advisor.
See the official report for 2019.
How can I submit those reports?
- ELSTER - the online portal of the tax office.
- Tax advisor - a tax advisor can submit your VAT reports on your behalf.
- Software - Accounting software like Sorted can help you to prepare and submit the reports to the tax office.
Final tip: Keep the collected VAT received from customers aside
Getting extra 19% on your revenue can definitely be appealing, but you have to remember that the VAT that you charged your customers is not your money, you will have to pay that to the financial authorities (Finanzamt).
Sorted tax guides are provided without liability and do not replace a tax advisor.
To get an accurate answer for your specific case, please consult a tax advisor.
You can always ask one of tax advisors on the Sorted platform.
Looking for a solution to simplify your VAT reports?
Sorted helps you to send your VAT reports directly to the financial authorities.