How vat / sales tax works in Germany
Germany levies VAT (Umsatzsteuer) at 19% on most domestic supplies of goods and services. Businesses charge output VAT, reclaim input VAT on purchases, and remit the difference through advance returns.
A 7% reduced rate covers basic foodstuffs, books and press, local public transport, and hotel accommodation. Restaurant meals served on site returned to 19% in January 2024, so hospitality bills need line-by-line care.
Small businesses can opt out of charging VAT under the Kleinunternehmer scheme when prior-year turnover stays at or below EUR 25,000 and current-year turnover stays within the statutory ceiling. Above that, monthly or quarterly advance filings apply.
Tax rates at a glance
- Standard VAT
- 19%
- Reduced VAT
- 7%
- Intra-EU supplies
- 0%
- Exports outside the EU
- 0%
- Restaurant meals on site
- 19%
- Small business threshold
- EUR 25,000
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersFreelancersExpatsCross-border foundersEU traders
Watch out for
- The 7% rate is narrower than many newcomers expect: food sold for immediate on-site consumption, most drinks served with meals, and hotel extras such as breakfast can fall under 19%.
- EU distance sellers face the EUR 10,000 EU-wide threshold before the destination country's VAT rate applies, with OSS filing as the standard route for B2C sales.
- Late or missing advance returns trigger penalty and interest risk quickly in Germany, so new businesses should set the filing calendar before the first invoice goes out.
- Exempt supplies such as most financial, insurance, and medical services look like 0% on the invoice but block input VAT recovery, which changes pricing math.
Frequently asked questions
What is the standard VAT rate in Germany?
The standard German VAT rate is 19% in 2026. It applies by default unless a supply qualifies for the 7% reduced rate, the 0% rate, or an exemption.
What is covered by the 7% reduced VAT rate?
Basic foodstuffs, books and newspapers, local public transport, and hotel accommodation are the main 7% categories. Restaurant meals consumed on site are back at 19% since January 2024.
Do small businesses have to charge German VAT?
Not always. Under the Kleinunternehmer scheme, traders with prior-year turnover of no more than EUR 25,000 can opt out of charging VAT, but they also cannot reclaim input VAT.