Do you plan opening a business in Germany? Read some things about German VAT first!
Business can be a very complicated domain, especially when you do not know the rules and the laws which must be respected. This is the reason why in this material we are going to talk about VAT and more precisely, about German VAT which can be considered a very important aspect for those who want to make some businesses in this country. So, here there is a list with some of the most important aspects which are related to this subject.
As you probably know, Germany is not only a country which is located in Europe, but also a member of EU. This means that if you are interested in opening a new business here, you should know that the law allows this country to set its own VAT rates. This happens due to the fact that on the 26th November 2006, the Council Directive created set of rules regarding VAT for its members, including their the right of setting their own VAT values. But in the German VAT has a much longer history. Experts from the economic domain say that it was introduced for the first time in 1968.
Why is German VAT so important?
Like we have mentioned before, German VAT, like any other tax, is very important if you intend to open a new business in this country. Moreover, you should bear in mind the fact that VAT is paid in the country where the goods are imported. Also, the VAT is reflected on the price of the services and products. German VAT rate is 7% for food, books, medical treatments, passengers’ transport, cultural events and newspapers, whereas, the other products such as clothes, shoes, tools and so on have a different German VAT rate which is set at 19%.
Furthermore, if you wonder when you have to pay this tax, we can offer you some useful information. For example, if you plan organizing an event such as an exhibition, you should know that you will have to pay VAT on the sales you make during the whole event. Moreover, if you have a business which is not located in German, but which sales goods to German clients with the help of the Internet, you should pay the tax too. On the other hand, if you intend to import goods into Germany, you will have to take this tax into consideration, even if your business headquarters are located outside Europe.
Comparing German VAT with others countries from EU
Due to the fact that EU has 28 members, it is difficult to compare its VAT with all the other states. But in order to make things simpler, we have decided to summarize the information. Therefore, there majority of European States have a bigger VAT than Germany. For example, you can see that France has a 20% rate when it comes to VAT, whereas Denmark is famous for its 25% rate. On the other hand, there are few states such as Cyprus, the Netherlands or Malta which come with a lower rate. But it all depends on the rules and the economic situation from each country.