Value Added Tax (Umsatzsteuer) is a tax levied at every economic stage from the manufacturer to the retailer and is ultimately borne by the end consumer. Depending on the kind of product or service, German VAT of 7 or 19 percent is charged.

Entrepreneurs registered in Germany can deduct the paid VAT from the VAT they charge to customers. Therefore, VAT is only a transit item for those entrepreneurs.

For entrepreneurs that are not registered in Germany because they are not resident in Germany and don't achieve revenue in Germany, VAT paid in Germany is no transit item in a first instance. However, Germany and all other EU countries are bound by the 8th EU regulation to repay VAT paid by a foreign entrepreneur under certain circumstances.

This eighth EU regulation has been transferred into German law with Art. 18 sec. 9 Umsatzsteuergesetz (UStG, German VAT code).

According to Art. 18 sec. 9 UstG, entrepreneurs that are not resident in Germany and that do not achieve revenue that is liable to German VAT can apply for a refund of VAT paid in Germany.

Primarily, this concerns entrepreneurs who paid travelling and trade fair costs in Germany. But it is also possible for those foreign entrepreneurs who bought i.e. material and equipment, consulting and telecommunication services etc. in Germany.

The refundable VAT amount depends on the residency of the entrepreneur, as there are differences between those resident in another EU country and those resident in a so called third country.

Until 2009, all outside entrepreneurs needed to claim for a refund of German VAT until June 30th of the following year at the German tax authorities. This procedure has changed for EU residents in 2010.

Starting 1 January 2010, EU residents must claim a refund of German VAT at their home tax authorities electronically: for instance UK residents need to apply for a refund of German VAT at the HMRC.

The application deadline has been extended until 30 September of the following year.

For Non-EU residents (third country residents), the VAT reclaim procedure and qualifications remain unchanged: They can only claim for a refund if the country of residency doesn't have a VAT system or paid German VAT is not deductible in this system.

The German Ministry of Finance has published a table of countries that meet the requirements for a VAT refund.

The table includes the United States, Canada, Switzerland, Norway and Korea.
Entrepreneurs who are residents of these countries can claim for a refund of German VAT that is not VAT on fuel.

In addition, the refundable VAT needs to amount to EUR 1,000 or more (for a period of at least 3 consecutive months) or EUR 500 or more (if the application period is the calendar year).

The refund application needs to be filed with the German tax authorities (Bundeszentralamt für Steuern) who are responsible for the review of application forms.

For third country residents, the deadline for filing a refund application for VAT paid in one year is 30 June of the following year. Extensions are not possible.

It is recommended that you contact the relevant tax authorities or your tax accountant for further information or guidance.

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This article contains information of a general nature and should not be considered as legal advice.

Although the greatest care has been taken in drafting this article, it is possible that certain information may have become outdated or inaccurate since its publication. Martin Brune cannot be held liable for the consequences of actions or omissions based on the content of this article.