Value-added tax - General
In contrast to personal taxes (e.g. income tax), value-added tax is a tax on transactions. As a rule, tax is charged on any goods or services provided by a business to a third party.
As a transaction tax, value-added tax is designed such that financially it has to be borne by the end consumer. In technical terms though, it is not possible to charge the value-added tax to the consumer, and so it is owed by the entrepreneur actually doing the trade. The entrepreneur passes the value-added tax on to the customer by including it in the sales price.
Entrepreneurs whose turnover is not generally tax-free have the possibility of deducting from their own value-added tax bill the value-added tax they have been openly charged by other businesses, so-called "input tax". This way, value-added tax is only charged on the "value added" (i.e. the difference between the net cost price and the net sales price) of the product or service.
Foreign entrepreneurs without a permanent establishment in Germany
If foreign entrepreneurs do trading that is liable to value-added tax in Germany, they have to declare it to the tax office responsible for their particular country. A list of the tax offices responsible is provided here.
If a foreign entrepreneur who does not himself trade in Germany is charged German value-added tax, then on principle he is entitled to reimbursement. Thus foreign entrepreneurs not doing business in Germany can have input tax refunded in a special refund procedure for foreign entrepreneurs.
Further information on value-added tax can be found using the navigation bar on the left.
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