VAT in Germany for Foreign Businesses

VAT in Germany for foreign businesses: an overview

VAT in Germany (Umsatzsteuer) applies to supplies of goods and services that take place in Germany, regardless of where the supplier is established. The standard rate is 19% and the reduced rate 7% (§ 12 UStG).

Foreign businesses must therefore determine, for each type of transaction, whether the place of supply is in Germany, who owes the tax, and whether they must register with a German tax office. In many B2B cases, the reverse charge mechanism shifts the tax liability to the German customer, so no registration is needed. In other cases, such as sales from a German warehouse, imports, events or certain services to consumers, the foreign business must register and file German VAT returns, or use one of the EU one-stop shop schemes.

This article covers the main scenarios for foreign businesses, the registration duties, the reverse charge, distance sales and the one-stop shop (OSS), and the changes introduced by the EU's VAT in the Digital Age (ViDA) package. It also points out the German specifics that frequently surprise foreign companies, such as e-invoicing and the liability rules for online marketplaces.

Place of supply: when does German VAT apply?

The place of supply rules follow the EU VAT Directive. For goods, the supply generally takes place where the transport begins or, without transport, where the goods are located when the supply is made. A foreign business that sells goods from stock held in Germany therefore makes German taxable supplies. Intra-EU supplies between businesses are generally exempt in the country of dispatch and taxed as intra-Community acquisitions in the country of arrival.

For services, the general B2B rule taxes the service where the customer is established, while the general B2C rule taxes it where the supplier is established. Many exceptions apply: services connected with German real estate are taxed in Germany, admission to events in Germany is taxed where the event takes place, passenger transport is taxed where it occurs, and electronically supplied, telecommunications and broadcasting services to consumers are taxed where the consumer resides.

The reverse charge for foreign businesses

Under § 13b of the VAT Act (UStG), the recipient owes the VAT for a range of supplies by businesses established abroad, including services and supplies of goods by foreign businesses where the recipient is a business or a legal entity (§ 13b(2) no. 1 and (5) UStG). The foreign supplier issues an invoice without German VAT, indicating that the recipient is liable, and the German customer declares the VAT and, if entitled, deducts it as input tax at the same time.

The reverse charge relieves many foreign businesses from registration. However, it does not apply to all supplies. Supplies to private consumers, certain supplies of goods from German stock to customers who are not reverse charge recipients, admission to events, and specific exclusions such as passenger transport by coach mean that registration may still be required. Foreign businesses that make only reverse charge supplies and wish to recover German input VAT on their own costs, for example for trade fairs or business travel, use the EU refund procedure, or, for non-EU businesses, the refund procedure at the Federal Central Tax Office.

Registration and compliance in Germany

Foreign businesses that must register in Germany are assigned to central tax offices according to their country of establishment. After registration, they file monthly or quarterly advance VAT returns and an annual return electronically. Non-EU businesses may be required to appoint a fiscal representative in certain cases. German VAT law has strict formal requirements for invoices, and since 1 January 2025 businesses established in Germany must be able to receive structured e-invoices from other German businesses; the obligation to issue them applies in stages, as explained in our article on the e-invoicing mandate. Foreign businesses without a German establishment are not obliged to issue e-invoices but may receive them.

Online marketplaces are liable for VAT not paid by sellers on their platforms unless they meet certain record-keeping and due diligence duties, and marketplaces that facilitate certain distance sales are treated as deemed suppliers. Foreign sellers on marketplaces must therefore expect their registration status to be checked by the platform.

Distance sales and the one-stop shop

Since July 2021, under § 3c UStG and the corresponding EU rules, distance sales of goods from one EU member state to consumers in another are taxable in the member state of arrival once the supplier's total cross-border sales to consumers in the EU exceed EUR 10,000 per year. Below the threshold, suppliers established in only one member state can continue to apply their home VAT. Above it, they must charge German VAT on sales to German consumers. Instead of registering in each country, they can use the Union one-stop shop (OSS) in their home country to declare and pay VAT due in other member states through a single quarterly return.

Non-EU suppliers of digital services to consumers can use the non-Union scheme, and imports of goods in consignments of up to EUR 150 can be declared through the import one-stop shop (IOSS). The OSS covers only the supplies within its scope; supplies from German stock to German customers and purchases with German input VAT are not covered and still require registration. Our article on customs and import VAT explains import VAT and the end of the duty exemption for low-value consignments.

The VAT in the Digital Age package

The EU adopted the VAT in the Digital Age (ViDA) package on 11 March 2025, and it was published in the Official Journal on 25 March 2025. Its measures are introduced progressively until January 2035. According to the European Commission, the package allows member states to introduce mandatory domestic e-invoicing under specific conditions from entry into force; from 1 July 2028 a single VAT registration approach extends the OSS and a mandatory reverse charge for non-established suppliers, and platforms for short-term accommodation rental and passenger transport become deemed suppliers; and from 1 July 2030 digital reporting requirements apply to cross-border B2B transactions, based on e-invoicing.

For foreign businesses active in Germany, the single registration measures from July 2028 may reduce the cases in which a German registration is needed. At the same time, the move to real-time digital reporting will require ERP systems capable of issuing and receiving structured e-invoices for cross-border transactions. Germany's own e-invoicing mandate already prepares domestic businesses for this step.

Recovering input VAT in Germany

Foreign businesses often incur German VAT on costs without making any German taxable supplies themselves: hotel stays, trade fair stands, consulting, rental cars or goods purchased for re-export. VAT in Germany paid on such costs can usually be recovered without registration. EU businesses file their claims electronically through the portal of their home tax authority under the EU refund procedure; the claim for a calendar year must generally be submitted by 30 September of the following year. Non-EU businesses apply to the Federal Central Tax Office, where reciprocity with the applicant's home country can be required and certain costs, such as fuel, may be excluded.

Refund claims require original invoices or invoice data meeting German formal requirements. Invoices addressed to the wrong entity, lacking the supplier's VAT number or showing German VAT where the reverse charge should have applied are common reasons for rejection. Where a foreign business is registered in Germany because of other supplies, input VAT is deducted through the German returns instead of the refund procedure. Planning the correct route avoids lost VAT.

Tax audits and liability for VAT in Germany

German tax offices regularly audit foreign businesses registered for VAT in Germany and can conduct unannounced VAT inspections. Customers who receive invoices from suppliers involved in VAT fraud chains can lose their input tax deduction if they knew or should have known of the fraud, so due diligence on new suppliers, particularly in high-risk sectors such as electronics, metals and mobile phones, is important. Where errors are discovered, prompt correction under § 153 AO is required; see our article on voluntary disclosure for the distinction between correction and voluntary disclosure.

Common pitfalls for foreign businesses

• Consignment stock and call-off stock: moving goods to a German warehouse is a deemed intra-Community supply and acquisition unless the special call-off stock rules are met.
• Chain transactions: in sales with several parties and a single transport, only one supply is the zero-rated intra-Community supply; misallocating the transport can trigger German registration.
• Events and trade fairs: admission to events in Germany and related services can be taxable in Germany even for B2B customers.
• Invoices: invoices with incorrect VAT, missing reverse charge notes or incorrect VAT identification numbers lead to denied input tax deduction for customers.
• Permanent establishment versus fixed establishment: the VAT concept of a fixed establishment is distinct from the income tax concept, but both can be triggered by German staff and premises; see our article on permanent establishment risk.

Illustration: a Dutch online retailer sells to German consumers through its own web shop and keeps stock in a German fulfilment centre to shorten delivery times. Sales shipped from the Netherlands can be declared through the Dutch OSS once the EUR 10,000 threshold is exceeded, but sales shipped from the German fulfilment centre are domestic German supplies requiring German registration and returns, and the transfer of stock to Germany must also be declared.

How TRW & Co helps with VAT in Germany

We advise foreign businesses on VAT in Germany: analysing place of supply and reverse charge positions, assisting with registrations, structuring warehousing, marketplace and platform models, and preparing for e-invoicing and ViDA. In VAT audits and disputes with the tax authorities, including input tax denials and fiscal representative issues, we represent clients before the tax offices and finance courts. More on our tax work is available on our international tax page, or contact us directly. This article provides general information and is not tax or legal advice.