12 June 2020

GERMANY: Temporary reduction of VAT

Online sales? VAT registration in Germany can generate savings of up to 5%. The new tax rate will apply from July 1 to December 31, 2020. 

As a basic part of measures to stimulate the economy, the German government has approved a temporary reduction in VAT.  

The new tax rate will apply from July 1 to December 31, 2020. With this modification, the general rate will be reduced from 19% to 16% and the reduced rate from 7% to 5%. 

It is important to take into account the accrual rules of the tax, which do not always coincide with the date of issue of the invoice, and that in case of return of the purchased goods or cancellations the original tax rate remains in force. 

An interesting option to consider now is the possibility of voluntarily VAT registration in Germany, even if the 100,000 euro limit is not exceeded. In Germany, the general VAT rate will be 16% as opposed to 21% in Spain or the Netherlands, 23% Portugal or even 25% in Denmark and Sweden, thus obtaining a tax advantage of up to 9 points, depending on the country, that can compensate for the costs of the tax advisor in that country. 

In addition, economic circumstances lead Germany to be a country where online shopping is constantly growing and is not affected by the global crisis. Our registered customers in Germany have not only not been harmed by the current crisis, but have experienced a considerable increase in sales compared to their sales in other countries and are now also benefiting from this tax advantage. 

From the German Desk we will be pleased to attend your questions. 

Status: 12 June 2020 

Author: Eulalia Galceran, Tax Lawyer, Head of Spanish-German Desk 

Foto: Adobe Stock, andranik

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