The 2024 Guide to VAT Declaration in Germany

The VAT declaration in Germany is tricky to deal with, but it doesn’t have to be. This article will provide you with all the information you need about VAT return deadlines and rates to make filing your VAT returns as straightforward as possible.

What is VAT in Germany?

With few exceptions, VAT (Umsatzsteuer) is levied on every product and service sold in Germany. It is one of the most important taxes in Germany, with tax revenue of over 30%.
VAT is a transaction tax and, at the same time, a final consumer tax. VAT is collected by the selling companies and paid to the tax office for technical reasons, but ultimately it is borne by the buyer/consumer. From the consumer point of view, it is often referred to as “Mehrwertsteuer.” From the business point of view, it is often referred to as “Umsatzsteuer.”

How does the German VAT system work?

In Germany, there are three rates: 0%, 7%, and 19%. Unlike most countries where one rate applies regardless of your category or type of good, in Germany, each class (or tier) you can register for will have a different rate used depending on what it comprises. This differs from country to country, so make sure you check with someone who handles this process. We recommend speaking with your accountant if you don’t know how to figure it out. The VAT number can be applied for free from the tax authorities.

A general rule:

1. 19%

• Regular tax rate according to § 19 paragraph. 1 UStG
• Everything that is not exempt from VAT or subject to the reduced VAT rat

2. 7%

• Reduced tax rate according to § 19 (2) UStG
• Most foodstuffs, books and magazines, live animals, overnight stays, works of art, orthopaedic aids, etc.

3. 0%

• Goods and services exempt from VAT according to § 4 UStG
• ➜ Foreign deliveries, intra-Community deliveries, credit intermediation, insurance, etc.

Who needs to file a VAT declaration?

Rule: Every business is liable for turnover tax.

Anyone self-employed or any company that charges money for their services or supplies must charge VAT on them. Exception results from § 19 UStG: Small entrepreneurs are exempt from the obligation to pay VAT. Self-employed persons with a previous year’s turnover not exceeding 17,500 euros are considered small entrepreneurs. In addition, there must be a forecast that turnover will not exceed 50,000 euros in the current calendar year. This exception can be applied when applying for the tax number.

Exception: Small companies (no more than 17,500 euros annual turnover)

The Deadlines for Submitting your Declaration

Most entrepreneurs have to submit an advance VAT return to the tax office monthly or quarterly. The deadline for submitting the advance VAT return is always the tenth day of the month, which must be a working day. However, if this falls on a Saturday, Sunday, or public holiday, the deadline is postponed to the next working day.
However, there are significant differences in the regulation regarding the frequency of the advance VAT returns that the tax office expects from you according to the VAT Act. Therefore, you also have the option of deferring the submission of the monthly and quarterly advance VAT returns via the extension of the fixed period. Especially in combination with actual taxation, the extension of the set deadline is an effective instrument to make the legal due date for VAT more favorable for you as an entrepreneur and secure your liquidity.

What happens if you don’t submit a declaration in time

In the event of late payment (also of the special advance payment), a late payment surcharge of 1% shall be charged for each calendar month or part thereof (calculated from the expiry of the due date without grace period); the amount shall be rounded down to the next amount divisible by EUR 50.
As long as the advance payments have not been declared or fixed, no late payment penalty shall be charged. Late payment surcharges may therefore be incurred in the event of late submission of the advance return at the earliest from the day after submission. If the advance return is not submitted, late payment surcharges may be incurred at the earliest from the end of the day on which the tax assessment by the tax office has become effective. Suppose the advance payment is paid after the due date but still within the advance filing period extended due to an application for an extension of the individual filing period. In that case, the late payment surcharges may be waived for objective reasons of equity.

Support for the VAT Declaration

You can get support in regard to your monthly VAT declaration from two sources. The first one is a bookkeeping software, which can calculate your monthly VAT and transfer it via ELSTER to the financial authorities. This option requires a little bit of effort from your side. Unfortunately, the bookkeeping software providers currently don’t offer translations, which require you to use chrome translate or a translation tool like deepl.com. Following, we compare two bookkeeping software providers:

The first company is called FastBill, which has a rating of 4.1 stars on Google and prices starting from €8.99 per month. The software offers everything from time recording and tax consultant exports to VAT declarations.

The second company is called Lexoffice, and their starter package starts at €8.90 a month. Both FastBill and lexoffice offer an app for android & iOS to scan documents.

The second option is a tax consultant, which is more expensive than software but takes care of the whole process. Finding a great tax consultant who speaks fluent English and understands your business can be a challenge in Germany. This is where we can help. Contact us, and we will support you with your network of English-speaking tax consultants.