RECLAIMING IMPORT VAT IN GERMANY
Goods imported into Germany from abroad must be cleared for customs when they reach the German’s borders (i.e. International Airports or Sea Ports). The customs declaration is usually handled by an appointed carrier, freight forwarder or customs broker and gives rise to the payment of import duty and taxes.
Let us remind that a customs duty is applicable only when the value of the consignment is greater than €150 while import VAT is charged on commercial consignments of any value. The import VAT exemption that used to be applicable on small consignments valued at €22 or less has been removed since July 1st, 2021. Nevertheless, parcels with a value not exceeding €150 that are shipped to German consumers from a non-EU country can still benefit from an import VAT exemption when the foreign online retailer has opted for the IOSS registration via an Intermediary.
When a DDP terms (Delivered Duty Paid) is used for the shipment of a consignment to Germany, the carrier will generally advance the payment of import duty and VAT to the German customs and will send the corresponding invoice to the shipper. The latter can reclaim import VAT incurred in Germany if certain conditions are fulfilled.
Before you read further, please note that the first key condition to reclaim import VAT in Germany is to hold a customs clearance document also called Steuerbescheid Über Einfuhrabgaben displaying the name of your foreign company as the Importer of Record (IOR) at destination. Using the name of another company as the Importer of Record (also known on the market as “IOR services”) may lead to a permanent loss of your right to reclaim import VAT. You should therefore get an EU EORI number in order to be able to act as the Importer of Record. Secondly, your foreign company should be the owner of the goods imported into Germany for business purposes.
A. What is a DDP shipment to Germany ?
DDP or Delivered Duty Paid refers to shipments where the shipper (the overseas company not established in Germany) delivers goods sourced from a non-EU country to their final destination in Germany, but already cleared for importation.
The overseas company bears all landed costs, including transportation charges, import duty and taxes levied on the goods by the German Customs Authorities.
B. How import duty and taxes are charged in Germany ?
When sending a Delivered Duty Paid (DDP) shipment to Germany, an overseas company handles the shipment to a forwarding agent like FedEx, DHL or UPS, to name but a few. The latter arranges customs clearance in Germany in the name and on behalf of the shipper.
The freight forwarder or carrier pays in advance the duty and taxes to the German Customs and returns to the shipper an invoice corresponding to import taxes prepaid.
C. Can my company reclaim import VAT on a DDP shipment to Germany ?
YES! But this possibility is limited to the following cases:
- The delivery of the imported goods into Germany is followed by an installation or assembly (e.g. installation of a machine or assembly of industrial equipments).
- The goods imported and sold to a German company are Mobile phones or Integrated circuits (e.g. electronic components, semiconductor parts) with a minimum value of €5000 EUR.
- The goods imported are aircraft engines, spare parts and other aviation equipment sold to a German airline company operating mainly in the international air traffic for reward.
For other cases, it is possible to recover import VAT on a DDP shipment to Germany only if the overseas company is registered for VAT purposes in Germany. We strongly advise to start and complete the VAT registration process before the first shipment occurs. Also note that being registered for VAT in Germany means that the foreign company will have, in most cases, to charge 19% German VAT (standard rate) to its customer(s) in Germany.
D. What are the requirements for import VAT refund in Germany ?
For the three (3) points mentioned above, the following conditions must be met:
- The overseas company (the shipper) should be the Importer of Record (IOR) or the “Declarant” on the Customs document issued in Germany. To read more on the IOR requirements, please click here: Prepare your shipment.
- The overseas business (the shipper) applying for import VAT refund in Germany is a taxable person in the country of incorporation. A Tax certificate proving this status will be required.
- The customer in Germany is a taxable business registered for VAT (e.g. retailers, distributors, industrial companies, etc.). If your clients are private individuals, you can appoint an IOSS intermediary for import VAT relief on low value consignments.
- The amount of VAT for which a refund claim will be introduced represents at least 500 EUR for non-EU companies and 400 EUR for EU based companies.
- The VAT refund claim is submitted to the German Tax Authorities no later than June 30th of the year following the year of importation (for non-EU companies) or September 30th of the year following the year of importation (for EU based companies).
E. Which countries have a VAT refund reciprocity agreement with Germany ?
Overseas companies established in the following countries are eligible to recover import VAT in Germany:
The 26 other EU countries plus the following:
Andorra | Antigua and Barbuda | Australia | Bahamas | Bahrain | Bermudas | British Virgin Islands | Brunei Darussalam | Bosnia and Herzegovina | Canada | Cayman Islands | Republic of China (Taiwan) | Gibraltar | Greenland | Grenada | Guernsey | Hong Kong | Iceland | Iran | Iraq | Israel | Jamaica | Japan | Jersey | People’s Rep. of Korea (North Korea) | Republic of Korea (South Korea) | Kuwait | Lebanon | Liberia | Libya | Liechtenstein | Macao | Maldives | Marshal Islands | Macedonia | New Zealand | Norway | Oman | Qatar | Pakistan | St. Vincent and the Grenadines | San Marino | Serbia | Saudi Arabia | Solomon Islands | Eswatini (Swaziland) | Switzerland | United Arab Emirates | United Kingdom (UK) | United States of America (USA) | Vatican City.
F. Can I lose the right to reclaim import VAT in Germany ?
One of the conditions for a taxable person to reclaim import VAT incurred in Germany is to hold a customs document specifying him as “importer of record” or “declarant”. This formal requirement for exercising the right to deduct VAT is laid down by article 178 (e) of the Council Directive 2006/112/EC. In German law, refer to section 202 para. 1 no.2, UStR (i.e. VAT Guidelines).
In day-to-day business, it is very difficult for non-EU companies (including UK entities since the Brexit) to provide such a document, as the majority of German freight forwarders refuse to clear goods in Germany on behalf of a company established outside the EU. The absence of the required customs document or a document on which a different person is mentioned as the Importer of Record (IOR) will generally hinder the possibility of recovering import VAT paid in Germany.
It is however possible for a company established in a third country to anticipate this potential loss of VAT in Germany by importing goods to be sold on the German market through another EU country. To find out more about this procedure, we invite companies from outside the EU to read our article: Exporting to EU countries via France
G. Can I reclaim German import VAT if the goods are not immediately sold ?
Even if your company is not selling goods imported into Germany (i.e. there is no transfer of ownership immediately after the customs clearance), you can still recover import VAT if some legal conditions are fulfilled.
Below are few examples of import flows for which you can be eligible to reclaim German VAT :
1- You’re shipping goods into the warehouses of an Online Marketplace facilitating your B2C sales in the EU
2- You’re shipping networking equipment into a data centre in Germany (colocation service)
3- You’re shipping goods for storage in Germany under a consignment sale agreement
4- You’re shipping a machine or an equipment to be incorporated into a plant built in Germany
5- You’re shipping an equipment into Germany for rental or leasing purposes
6- You’re shipping an engine or a machine into Germany for maintenance under a warranty agreement
H. How long does it take before receiving the VAT refund in Germany ?
In Germany, the tax authorities examine each claim and make a decision within 4 to 6 months after having received the VAT refund application and all the relevant documents. We remind you that this is an average timescale provided for your information only. The German Tax Authorities can decide to run a thorough investigation on a specific claim and will send to the applicant or to its agent a letter of inquiry.
I. Further help or advice ?
If you have an inquiry about the possibility of reclaiming import VAT paid in Germany, feel free to send us a message (our email address is displayed on the right side of the contact form) or call us by dialing +33-261-536-544.
The content published here above is based on information timely as of 24th September 2021, unless otherwise indicated. Amendments to the tax laws in various EU countries covered here could have been passed recently. Therefore, readers should contact Corintax Consulting for further insights.