|VAT Rate on Digital Services||VAT on Cross-Border Electronically Supplied Services||Digital Reporting Requirements for Foreign Sellers Providing Electronically Supplied Services|
VAT on Cross-Border Digital Services in Germany
Digital Services in the European Union(EU) are often referred to as electronically supplied services (ESS). Germany applies the harmonized EU VAT rules for ESS.
- For B2B supplies of such services, the general place of supply rule for services has to be taken into consideration.
- For B2C supplies, the EU ESS rules should apply to foreign companies selling to German consumers.
Under the EU’s B2C ESS rules, until the sales value reaches EUR 10,000 (including distance sales of goods), the seller can charge VAT where it is resident. Once the sales exceed the threshold, the seller should register for VAT in Germany, or it can choose to account for the VAT under the EU’s One Stop Shop (OSS) regime.
VAT Rate: 19% VAT rate is typically applied to the sale of affected electronically supplied services (ESS).
Electronically Supplied Services (ESS) in Scope
Electronically supplied services include services that are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.
The following are examples of electronically supplied services:
- Website supply, web-hosting, distance maintenance of programs and equipment
- Supply of software and updating thereof
- Supply of images, text, and information and making available databases
- Supply of music, films, and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific, and entertainment broadcasts and events
- Supply of distance teaching
Communication via email between the service provider and its customer does not qualify as ESS.
Determining the Location of the German Consumer
The place of supply of the electronically supplied services from a business to a customer (B2C) is where the customer has its registered office, residence, or habitual residence.
- If telecommunications, broadcasting & electronic services (TBE) services are received at a specific location (e.g., WLAN hotspots, Internet cafés, etc.), the recipient is considered to be at that location
- If services are received via a landline connection, the recipient is considered to be at the landline location
- If services are received via mobile networks, the country code of the SIM card determines the location
- If reception of services requires a decoder, program, or satellite card (e.g., for broadcasting services), the recipient's location is where the device or card is. If this place is unknown, it is at the address to which the program or satellite card was sent.
- In all other cases, two non-contradictory pieces of evidence determine the recipient's location, in particular:
- the billing address of the customer
- the Internet Protocol (IP) address of the device used by the customer or any method of geolocation
- bank details such as the location of the bank account used for payment or the billing address of the customer held by that bank
- the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored on the Subscriber Identity Module (SIM) card used by the customer
- the location of the customer’s fixed landline through which the service is supplied to him
- other commercially relevant information.
VAT Registration for Foreign Companies
Foreign companies can avoid VAT registration in Germany by using OSS after exceeding the registration threshold. The OSS simplifies the declaration of B2C sales of goods and services in the EU. It allows businesses to register electronically in one Member State and file a single VAT return for all eligible sales of goods and services across all Member States where the taxpayer has an obligation to report and remit.
The application form for non-resident businesses to obtain VAT ID in Germany should be handled electronically by the local/responsible tax office.
- VAT registration threshold for intra-EU distance selling of goods and B2C telecommunications, broadcasting & electronic services (TBE): EUR 10,000 (net) per calendar year
- VAT registration threshold for non-resident, non-EU based suppliers of electronically supplied services (ESS): No registration threshold
- Fiscal representatives: Mandatory only for non-EU established businesses
VAT Returns and payment of taxes
VAT returns for non-residents
If registered, businesses should collect and remit taxes to the German Tax Authority using So-called advance sales tax return( Umsatzsteuer-voranmeldung (UStVA))
Germany does not provide simplified returns for non-resident companies. Instead, they can use the EU OSS return to remit taxes via another EU Member State and avoid VAT registration in Germany.
|VAT Return Name||OSS|
|Filing Deadline||Q1: 30 April, Q2: 31 July, Q3: 31 October, Q4: 31 January|
|Payment Deadline||Same as the filing deadline|
|Payment Currency||Euro in general. However, Member States who have not adopted the euro may require payment in their national currencies.|
|Language||German or English|
|Fiscal Representative||Non-EU established businesses may be required to appoint a fiscal representative|
|Input Tax Recovery||Not allowed in the OSS return. VAT should be deducted via the domestic VAT returns or by way of using the special scheme for foreign VAT recovery.|
|Record Storage||10 years; location can be chosen by the taxpayer|
Digital Reporting Requirements for Cross-Border Digital Services
There are currently no digital reporting requirements for sales of cross-border digital services in Germany.