VAT number in Germany

You should pay attention to the tax issues when starting a business in Germany. You must apply for tax registration after registering your business at the German Trade Office. Then, the tax office will assign you a tax number. The question is, is it mandatory for all companies in Germany to obtain a VAT number? We will explain about this in this article from Wise Business Group.

Applying for a VAT number in Germany

Undoubtedly, dealing with the tax aspects is one of the crucial requirements for registering a business successfully in Germany. However, you should pay a certain percentage of your business profits to the tax office. Thus, you must apply for a sales tax or tax identification number when registering your business in Germany in most cases.

As one of the offices engaged in the business registration process in Germany, the tax office will automatically be notified of your business registration at the trade office. As a business owner in Germany, you must provide information about your payable sales tax when registering for tax and completing the relevant form. In other words, you need to predict how much profit your business will make.

Small business regulations and sales tax in Germany

If you choose the small business regulations in Germany, you must no longer required to declare sales tax. However, you may still need to apply for a sales tax or VAT identification number in Germany. In particular, this is essential when trading in the European Union. We will explain more in this regard.

In any case, by selecting the relevant option in the application form, the tax office will send your request to the Federal Central Tax Office. In addition, you can submit your application directly to this office. It is also possible to apply online.

After reviewing your request for a tax number, the tax office will assign you a unique number and send it to you in writing. This tax number will always be valid, even if the company headquarters changes, in which case, for example, you must report to the Trade Office.

You can contact us to register and start a business in Germany. Our consultants will provide you with all the information needed for business and tax registration in Germany as quickly as possible.

What is a VAT number required for in Germany?

What is the legal basis for using a sales tax identification number or a value-added tax (VAT) identification number in Germany?

• All entrepreneurs who make deliveries inside and outside of Germany and provide services subject to tax need such a number (see section 3, paragraph 2 of the German Sales Tax Act).
• In addition to entrepreneurs, legal entities also need a Value Added Tax number (VAT) if they make so-called intra-community purchases.

How to apply for a VAT number in Germany

• When setting up a company or registering a business in Germany, you can submit your application for a VAT number directly to the responsible tax office.
• It is also possible to submit your application flexibly online at bzst.de from 5 am to 11 pm.
• Another way is to send your application in writing to the Federal Central Tax Office in Saarlouis.

Information required to apply for a VAT number in Germany

As a business owner, you should be aware of the following when submitting your application for a VAT number in Germany:

• The tax office that is responsible for collecting corporate taxes.
• The tax number that you operate your company on.
• The legal form of your company, which you must specify beforehand.
• In the case of a sole proprietorship, mentioning the name and date of birth of the director of the taxable company is mandatory.
• For other legal forms, mentioning the name and address of the company is enough.

Different types of tax numbers for business owners in Germany

Tax number in Germany

All individuals and legal entities subject to taxation receive a tax number in Germany. This tax number can be changed, for example, in the following cases:

• When a person relocates.
• When a person starts a business or a self-employment/freelance activity.

Business owners must mention the tax number in all tax declarations. After completing the tax registration, the tax office will notify you of this number in writing. Those merchants who do not have a VAT number must display this tax number on their invoices.

Tax identification number in Germany

In the future, the tax identification number will replace the tax number of individuals in Germany. Currently, these two numbers exist simultaneously. A tax identification number is a number that even newborn babies receive. This number remains constant throughout the person’s life, and the purpose of assigning it to individuals is to simplify the communication of tax affairs.

You should not submit a separate application to obtain this tax ID. Since 2007, tax authorities communicate this number to all citizens in Germany. However, you should note that you can not only use the tax identification number to communicate with the tax authorities. With the help of this number, the tax offices receive the allocation of the income generated and the contributions paid to health insurance companies and, for example, Riester contracts (a type of pension insurance).

Sales tax or VAT identification number in Germany

This sequence of numbers, which plays a significant role in the economic life of people in Germany, helps to unambiguously identify legal entities and entrepreneurs involved in the trade of goods and services in the European Union. The purpose of assigning a VAT or sales tax identification number is to determine the relevant sales tax and pay it to the responsible tax office. All business owners in Germany need such a number. You can find this tax number on all invoices issued by German businesses.

The sales tax identification number is identified by different names in other countries. For this purpose, the abbreviation of each country’s name is usually used, which allows a relatively simple attribution. Hence, the sales tax identification numbers always have the abbreviation DE in Germany.

Those business owners who export their goods or services to another EU country must not collect sales tax, as the buyer must pay this amount under the relevant regulations in the country receiving the goods and services. Therefore, you should always mention both identification numbers on your invoices. Even when you operate business within a country’s borders, you must mention the sales tax identification number in your invoices. The overall aim is to control the so-called cross-border services and generate meaningful statistics.

You can contact our consultants to find out about the types of tax numbers required and the taxes payable for your business in Germany.

The importance of the VAT number in accounting matters in Germany

All people who intend to register a business in Germany must also collect sales tax. German Businesses should not receive this tax only if they apply the small business regulations. However, the possibility of input tax deduction determines the actual amount of the tax burden. The sale of a business is identified by its VAT or sales tax number. German business owners must pay sales tax to the tax authorities after receiving it. The payment intervals also often depend on their sales.

You must always keep the sales and input tax accounts up-to-date concerning accounting. The notable point here is that if you choose the small business regulations to set up a business and start your economic activity in Germany, you will no longer need to pay sales tax to the tax office. However, in many cases, you must still apply for a VAT (sales tax) identification number in Germany.

The VAT number for small businesses in Germany

Among the other uses of the VAT identification number in Germany, we mention facilitating the trade of freelancers and self-employed people who operate as small business owners in other EU countries. They can use a sales tax or VAT identification number instead of their tax number.

If you also use the regulations of small businesses in Germany, you must include the relevant wording in your invoices.

Here again, it’s worth mentioning that you will be exempt from paying sales or value-added tax due to using the small business regulations. However, if you export goods or services to another EU country, you are generally exempt from paying VAT. In such a case, sales tax or value-added tax is collected according to the relevant laws in the destination country. Otherwise, there is a possibility of double taxation.

Some more points about VAT in Germany

In addition to the above, we can say that the VAT number, as the most official number in Germany, has a specific proof function. Therefore, entrepreneurs can use it to prove their status.

• In many cases, you can skip the sales tax calculation in practice. It will save on tax refunds that can be very complicated and time-consuming.
• An essential point is that the sales tax law explicitly states that you can use your sales tax or VAT identification number instead of your tax number in Germany (paragraph 4, section 14).

Will there be multiple tax numbers if there is more than one business in Germany?

Another question our clients frequently ask is:

“If a person runs more than one business in Germany, will they receive multiple tax numbers?“

No. Even if you run multiple businesses in Germany simultaneously, you will receive only one tax number. The tax authorities will consider your set of business a single business unit and assign them just one tax number. You must briefly specify all your business activities in a company to be taxed. You can imagine it would quickly become confusing and chaotic if there were multiple tax numbers for each person in Germany. To better understand, it is enough to consider the additional efforts in accounting. Also, numerous sources of error would occur in the calculations involved when creating an invoice.

Our group can accompany you in the business setting up and developing process. Also, we help you obtaining various tax numbers, and doing tax and accounting affairs in Germany. Just contact us via WhatsApp or email.

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Summary of important information about the VAT number in Germany

• The responsible tax office, as one of the departments involved in the business registration process in Germany, will automatically be notified of your business registration at the trade office.
• You must apply for a sales tax number when you start your business in Germany and as soon as the business license is available. The reason for this is that you have to correctly record all the financial transactions of your business in the accounts from the beginning.
• Receipt and collection of sales tax is part of a commercial activity. Finally, you must pay it to the tax office by mentioning your requested tax number.
• To obtain a VAT or sales tax identification number, you can submit your application online when registering your business and as part of your tax registration. Another way is to submit your request in writing and directly to the responsible federal tax office.
• VAT number is used in Germany to facilitate trade with other EU member states. Note that the corresponding country code will be placed in front of the numerical sequence.
• The German sales tax law explicitly states that you can use the VAT ID number on your invoices instead of the personal tax number.
• Small businesses in Germany are not required to declare sales tax as long as they do not exceed the limit. It is essential for cross-border trade in the European Union to Obtain a VAT identification number.

Tax and accounting consulting in Germany

Our tax consultants and accountants at Wise Business Group are ready to answer your questions in these areas. They can help you with tax registration, information on the types of taxes payable, obtaining relevant tax numbers, completing tax returns, and reducing the tax burden in Germany. You can contact us via WhatsApp to schedule a consultation.

You can also complete the form below and send it to us to participate in online counseling sessions.