VAT In Germany: Obligations, Rate, Registration, and Exemptions [2026]

Germany’s VAT system is an EU-aligned consumption tax where businesses collect tax on taxable supplies, offset input VAT, and remit net amounts, with obligations covering registration, invoicing, filing, multiple rates, exemptions, and cross-border rules compliance.

Key takeaways 

• VAT operates on output minus input principle; refunds arise when deductible input VAT exceeds charged output VAT.
• Standard rate is 19%, reduced 7%, zero-rated applies to exports and intra-EU B2B; exemptions block input recovery.
• Domestic SMEs have turnover thresholds; foreign, non-EU, and stock-holding sellers register from first taxable activity.
• Compliance requires proper invoices, structured e-invoicing readiness, ten-year records, and electronic filing via ELSTER.
• Returns include advance filings, annual reconciliation, EC Sales Lists, strict deadlines, and special rules for OSS and reverse charge.

What is VAT?

Value Added Tax (VAT) is an indirect consumption tax charged on goods and services at each stage of the supply chain, from production to final sale. Although businesses collect and remit VAT to the government, the final burden is borne by the end consumer.

Key characteristics of VAT:

• It is charged at each stage of value addition (manufacturing, wholesale, retail).
• Businesses charge VAT on sales (output VAT) and recover VAT paid on purchases (input VAT).
• Only the net VAT (output minus input) is paid to tax authorities.
• VAT is neutral for businesses, as they are intermediaries, not the final taxpayers.

Example:

A manufacturer sells goods to a retailer and charges €20 VAT. The retailer later sells to a customer and charges €44 VAT. The retailer pays only €24 to the tax office (€44 − €20). Ultimately, the consumer pays the full VAT, while businesses merely pass it along.

How Does VAT Work in Germany?

In Germany, Value Added Tax (VAT) operates under standard EU VAT principles. Businesses act as intermediaries, collecting VAT on behalf of the government, while the final consumer bears the tax burden.

1. Charging VAT (Output VAT): 

VAT-registered businesses must charge VAT on taxable sales at the applicable rate (typically 19% or 7%) and clearly show the VAT amount on invoices.

2. Paying VAT on purchases (Input VAT): 

When a business purchases goods or services for operational use, it pays VAT to suppliers. This VAT is referred to as input VAT.

3. Net VAT calculation: 

At the end of each reporting period, the business calculates its VAT liability:

VAT payable = Output VAT − Input VAT

• If output VAT exceeds input VAT, the difference is paid to the tax office.
• If input VAT exceeds output VAT, the business can claim a VAT refund.

Suggested Read: VAT Calculator Germany 2026​ Calculate VAT Online

4. Filing VAT returns: 

VAT returns are submitted to the German tax office with all details of sales, purchases, input VAT, Output VAT, nil-rated supplies, etc

Key VAT Obligations in Germany

Businesses operating in Germany must comply with the following VAT obligations 

• VAT Registration: Businesses that make taxable supplies in Germany are required to register for VAT with the German tax authorities and obtain a German tax number and, where applicable.
• Charging and Collecting VAT: Businesses that are registered for VAT must charge VAT on taxable supplies at the applicable rate and collect the VAT from customers as part of the transaction value.
• VAT Invoicing: Businesses that issue VAT invoices must comply with German invoicing requirements and generate VAT invoice with mandatory details. They must also shift to the structured e-invoicing as required.
• Input VAT Deduction and VAT Remittance: Businesses that incur VAT on purchases for taxable or zero-rated activities may deduct input VAT and are required to remit the net VAT payable to the German tax office within statutory deadlines.
• VAT Filing: Businesses that are registered for VAT must submit periodic VAT returns and annual VAT returns with all the details of input VAT, Output VAT, sales, purchase etc. for the period.
• Record-Keeping and Documentation: Businesses that are subject to VAT must maintain VAT records, invoices, and supporting documentation for 10 years.

German VAT Rates [2026]

Germany applies three VAT rates under its VAT Act (UStG). The applicable rate depends on the type of goods or services supplied:

Additional Notes

• Zero-rated ≠ VAT-exempt: Zero-rated supplies are taxable and allow input VAT recovery; exempt supplies do not.
• Evidence is critical for 0% VAT (e.g., customs export confirmation, VAT ID verification).
• Temporary VAT changes may occur, but unless officially announced, standard rates apply.
• Goods and services that are fully VAT-exempt (e.g., insurance, financial services, residential rent) are governed separately under §4 UStG.

Difference Between VAT Exemptions and Zero-Rated VAT

Both VAT-exempt and zero-rated sales result in no VAT charged to the customer, but they differ in input VAT recovery.

• VAT-exempt supplies: No VAT is charged, and the business cannot reclaim input VAT on related costs. These are listed mainly under §4 UStG and include services such as healthcare, education, finance, insurance, and residential rent.
• Zero-rated supplies: VAT is charged at 0%, but the sale is still taxable, and the business can reclaim input VAT. This mainly applies to exports and intra-EU B2B supplies.

In simple terms: 

Exempt = no VAT charged, no input VAT recovery.

Zero-rated = no VAT charged, input VAT recovery allowed.

Who Needs to Register for VAT in Germany?

Any individual, company, or entity that independently carries out a commercial or professional activity and makes taxable supplies in Germany may need to register for VAT. The obligation to register depends on the nature of the business, its turnover, and its location:

Example 1: Must register (prior year above €25,000)

BerlinTech UG had €31,500 turnover in 2025 and expects €80,000 in 2026. Because 2025 > €25,000, it must register for VAT for 2026.

Example 2: Must register (prior year below €25,000, but 2026 expected above €100,000)

München Design Studio (sole proprietor) had €19,600 turnover in 2025 but expects €130,000 turnover in 2026.

Even though 2025 < €25,000, the business cannot use the SME exemption rule in 2026 because its 2026 expected turnover exceeds €100,000. It must register for VAT and start charging VAT on taxable sales.

How to Register for VAT in Germany?

If a business is obligated to register for VAT in Germany, the following steps apply. The process differs slightly for domestic businesses and foreign businesses.

Domestic businesses (established in Germany)

1. Complete the online tax registration questionnaire with the local tax office
2. https://www.elster.de
3. Provide business details such as legal structure, address, activity, and expected turnover
4. Indicate whether you will apply the small business VAT scheme or standard VAT
5. Submit the registration before starting taxable sales
6. Receive your German tax number from the tax office
7. Receive your VAT identification number by post

Foreign businesses (not established in Germany)

1. Confirm that your activities require German VAT registration (no turnover threshold applies)
2. https://www.bzst.de
3. Identify the correct German tax office responsible for foreign registrations.
4. Gather required documents (company registration, address proof, director details, proof of intended German activity)
5. Complete the German VAT registration application form
6. Submit the application and documents to the assigned tax office
7. Respond promptly to any follow-up questions from the tax authority
8. Receive your German tax number and VAT identification number

After you get the VAT number (for both domestic & foreign)

1. Register for ELSTER (Germany’s online tax portal).
2. File VAT returns as required (new registrants often start monthly).
3. File the annual VAT return.

VAT Filing in Germany

VAT filing in Germany refers to the ongoing obligation of VAT-registered businesses to declare, pay, and reconcile VAT with the German tax authorities (Finanzamt). Germany operates a self-assessment VAT system, meaning businesses are responsible for calculating and reporting their VAT correctly and on time.

Types of VAT Returns in Germany

VAT compliance generally involves three types of filings.

• VAT Advance Returns: These are periodic VAT returns used to report output VAT and input VAT. They are filed monthly or quarterly depending on VAT liability, submitted electronically via ELSTER, and any VAT payable must be paid by the same deadline.
• Annual VAT Return: This is a summary return for the full calendar year. It reconciles all advance returns filed during the year and is mandatory for all VAT-registered businesses, including foreign companies.
• EC Sales List: This is required if the business makes intra-EU B2B supplies of goods or certain services under the reverse-charge rule.

VAT Filing Frequency

The filing frequency depends mainly on the VAT payable in the previous year.

• If VAT payable (previous year) is over €7,500: Monthly filing.
• If VAT payable (previous year) is between €1,000 and €7,500: Quarterly filing.
• If VAT payable (previous year) is below €1,000: Annual filing only.

Newly registered businesses are usually required to file monthly VAT returns for the first two calendar years, regardless of turnover.

VAT Filing Deadlines

Germany sets strict deadlines for VAT return submission and payment.

• Standard deadline: VAT returns are due by the 10th day of the following month. For example, the January VAT return is due on 10 February. Payment must reach the tax office by the same date.
• Deadline extension: Businesses can apply for a one-month filing extension. Monthly filers must make a special advance payment (typically 1/11 of prior year VAT). This is commonly used to improve cash flow.

Details to be Reported in VAT Return

Each VAT return captures the VAT charged, VAT paid, and the net outcome.

• Output VAT: VAT charged domestic sales (19% / 7%), imports and intra-EU acquisitions (self-assessed VAT), and certain reverse-charge transactions.
• Input VAT: VAT paid on business purchases, import VAT, and intra-EU acquisitions (if deductible).
• Net VAT position: VAT payable results if output VAT exceeds input VAT. A VAT refund results if input VAT exceeds output VAT.

VAT Returns Filing Methods: ELSTER

All VAT filings in Germany must be submitted electronically via ELSTER (Germany’s official online tax portal). Businesses must register for ELSTER access, file returns using the official electronic format, and retain supporting documents such as invoices and customs records.

Special VAT Reporting Obligations

Certain transaction types trigger additional VAT reporting requirements.

• Reverse charge transactions: Output VAT and input VAT are reported simultaneously. If the business is fully entitled to deduct input VAT, there is typically no VAT payment impact even though it is still reportable.
• Intra-EU transactions: Intra-EU supplies are reported in both the VAT return and the EC Sales List (ZM). Intra-EU acquisitions are self-assessed and reported in the VAT return.
• OSS / IOSS: OSS returns are separate from German VAT returns. If a business uses OSS, B2C EU sales covered by OSS are excluded from German VAT returns, but domestic German sales must still be reported locally.

Who Does NOT Need to File VAT Returns?

Some businesses may not be required to file regular VAT returns depending on their VAT status.

• Small businesses under §19 UStG: Typically no advance VAT returns and usually only an annual declaration for informational purposes.
• Businesses making only VAT-exempt supplies: Often do not need to file VAT returns unless they are registered for VAT for other reasons.

VAT on Imports and Exports

Germany applies VAT so that tax is ultimately paid in the country of consumption.

• Imports into Germany (from non-EU countries): Import VAT is charged by German Customs at the same rate as domestic VAT (19% or 7%). VAT-registered businesses can usually reclaim this import VAT as input tax in their VAT return, while non-registered importers (e.g. private individuals) cannot.
• Exports from Germany (to non-EU countries): Exports are zero-rated, meaning no German VAT is charged, provided the goods physically leave the EU and export proof is retained. Businesses can still reclaim input VAT related to these exports.
• Intra-EU B2B transactions: Supplies from Germany to VAT-registered businesses in other EU countries are zero-rated in Germany. The buyer accounts for VAT in their own country under the reverse-charge mechanism, and the sale must be reported in an EC Sales List.
• Intra-EU B2C transactions: German VAT is charged unless the seller uses OSS and applies the customer country’s VAT rules once thresholds are exceeded.
• Intra-EU acquisitions: When German businesses buy goods from another EU country, the supplier does not charge VAT, but the German buyer self-assesses German VAT and deducts it in the same return if entitled.

Germany VAT Exemptions 

Germany exempts certain goods and services from VAT under Section 4 of the German VAT Act (UStG). For VAT-exempt supplies, no VAT is charged to customers and businesses generally cannot reclaim input VAT (unlike zero-rated supplies).

Key VAT-exempt categories include:

• Healthcare and medical services provided by licensed professionals (doctors, hospitals, therapists).
• Education and training, such as school and university tuition and approved vocational or adult education.
• Cultural and artistic services provided by public bodies or non-profit organizations (e.g. museums, theatres, concerts).
• Financial and insurance services, including banking, loans, payments, and insurance premiums.
• Real estate, especially residential rent and most property sales (with an option to tax some commercial rentals).
• Social and charitable services, such as childcare, elderly care, and services by recognized non-profits.
• Basic postal services provided by Deutsche Post.
• Other specific exemptions, including funeral services, lotteries, public broadcasting fees, and investment gold.

Conclusion

Businesses making taxable supplies in Germany may need to register for VAT, comply with invoicing and record-keeping rules, and file VAT returns electronically. The German VAT framework is evolving, and the government may update VAT implementation and reporting requirements, including the mandatory adoption of structured e-invoicing, to strengthen digital compliance and tax transparency.

Suggested Read: 

• E-Invoicing in Germany: Obligations, Timeline, Requirements, Format & Examples
• What is EN 16931? Electronic Invoicing Standard in Germany
• PEPPOL in Germany: How it Works, Benefits, BIS Format
• How to Receive E‑Invoices in Germany? Format, Process, Validation and Archiving
• E-Invoicing for Small Businesses in Germany: Creating, Receiving, Deadlines & Formats