As Germany is a member of the EU hence, EU VAT Directive allows member countries to charge at least 17% VAT. But, countries may also apply low rates of VAT on certain goods and services. But they must follow the rules defined under the EU VAT Directive.
There are two basic rules given by the EU VAT Directive for EU countries, which are discussed below:
- If the consumer belongs to any EU member country, so the seller will charge VAT rates defined by the country of the consumer.
- If the consumer doesn’t belong to any EU member country, so 0% VAT charges are applicable.
19% VAT rates are standardized in Germany with respect to the EU average. In the same way, all EU Union countries charged differ or lower VAT rates on physical and digital products.
Lower VAT rates
In Germany, reduce 7% VAT rates are applied on basic consumer goods and services like food items, water supplies, medical equipment for disabled persons, local public transport, books, periodicals, newspapers, writers/composers, agricultural inputs, social services, firewood, take away, cut flowers and plants and hotel stays, etc. Similarly, services like bank, health and community work are irrespective of VAT.
It is necessary to add VAT rates when the pricing of a product or service and its payment is due on the end buyer. All companies must need to pay their VAT according to their turnover.
VAT for Non-EU Citizens
Non-European citizens can enjoy tax-free shopping in Germany; under terms and conditions. And in some cases, if they paid VAT charges so it will refund.
Schemes to register for VAT
There are several themes, on which it is necessary to register for VAT, as follows:-
- In order to make sales possible of goods which are inclusive of German VAT, all Non-European or foreign dealers have to register themselves for the tax plans in the country.
- When goods are importing from Non-European countries.
- When selling and delivering goods to any foreign consumer.
- When buying and selling any goods.
- When organizing events, if delegates are paid.
- Purchasing goods from another EU country.
- When selling E-commerce goods.
- When companies reached their threshold limits.
VAT on Digital Goods
Every country of the EU union must have to apply VAT on digital goods. According to the EU VAT Directive, VAT rates ranging from 17%-27% among all EU countries, depending on each country how much they charged. But in some cases, sales tax on digital products are exempt. Like all other EU countries, VAT is charged on all digital goods and services when selling.
Selling digital goods to a citizen of EU countries, so in this scenario, the VAT is applied with respect to the consumer’s location.
By bulk update, one can easily achieve the opportunity of zero (0%) tax on bulkier digital goods.
Time Frame for VAT
All value-added tax in Germany must be paid within quarterly or 6 months or annually depending on the companies and consumers.