July 25, 2024


Business & Finance

What are the VAT rates in Germany?

3 min read

The normal VAT rate in Germany is 19 percent. However, certain goods and sales for daily needs are an exception; the reduced tax rate of currently seven percent applies here.

How did VAT and the name come about?

Historically speaking, value added tax has been with us for a long time. The first general consumer taxes were set up a few hundred years ago. The first similarities to the current system can be traced back to the eighth century in France. This gave rise to the term: “Teloneum”, which means something like: duties, taxes, fees.

The system known to us was applied in Germany from 1967 onwards, with changing tax rates, mostly increasing.

What are the exceptions to VAT?

The VAT system means sheer stress for quite a few entrepreneurs. The administrative effort is immense. Regular appointments for submitting the VAT advance return make daily business more difficult. A relaxation of the regulations has therefore been formulated for small businesses. This enables small business owners not to calculate VAT.

The special cases also include, for example, hotel stays or basic food. The value added tax on food is seven percent. The amount of VAT in Germany for hotel bookings is just as high or low. As you calculate sales tax you can have the best deals there.

New VAT for digital content since January 2019

  • The e-commerce industry has had to adapt to massive changes since January 1st, 2019. Online shop operators who offer apps, e-books and downloads have had to adapt to fundamentally new guidelines on invoices and sales tax.
  • Can the common term “VAT” be used instead of the official term “VAT” on proper invoices? Or does this put the recipient’s input tax deduction at risk? We consulted laws, ministries, authorities and experts.

The terms “sales tax” and “sales tax” have the same meaning. Strictly speaking, the law only recognizes sales tax. The “added value” is only the assessment basis for the amount of the sales tax to be paid: The entrepreneurs involved in the value chain only have to pay the difference between the sales tax received by their customers and the sales tax they have paid themselves (this is the “input tax”) to the tax office. Ultimately, only the added value generated in the company is taxed.

Basics of sales tax law – simply explained

If the whole subject of sales tax has so far been a book with seven seals for you, it is worth taking a look at our information package “Learning tax basics sales tax, input tax and sales tax “.


But even if you have long handled sales tax, value added tax and input tax with confidence and have been submitting advance tax returns, permanent deadline extensions and annual returns for years, the question of how this type of tax should be described on invoices or credits: Do the increasingly finicky tax offices insist on the law used term “sales tax”? Do you also let the common term “VAT” get away or does this possibly endanger the recipient’s input tax deduction?