COUNTRY TAX PROFILE: GERMANY
Goods imported into Germany from a non-EU country must be cleared for customs when they reach the German borders (International Airports or Sea Ports).
The customs declaration is usually prepared and filed by an appointed carrier or freight forwarder. This procedure gives rise to import duty and taxes levied by the Customs Authorities. Let us remind that import duty is levied on a good having a minimum value of € 150 and import VAT is due on a product valued at least at € 22. Small goods with a value under the mentioned thresholds are exempt of duty and taxes, except in case of mail ordering.
In the course of international commerce, it is the recipient or the consignee of the cargo which usually pays the customs taxes in the country of arrival.
However, the competitive pressures of the market or issues related to the ownership of the goods can justify, in certain circumstances, that the foreign shipper bears import duties and taxes in Germany. In such a case, we talk of a shipment or a sale under DDP terms (Delivery Duty Paid).
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 the behalf of the shipper.
The freight forwarder or carrier pays in advance the duty and taxes to German Customs, and returns an invoice corresponding to the taxes prepaid to the shipper.
C. Can my company reclaim import VAT for DDP shipment to Germany ?
YES! But this possibility is restricted to the following cases:
- Delivery in Germany is followed by an installation or assembly (e.g. installation of a machine or assembly of industrial equipments).
- Goods sold are mobile phones or integrated circuits (electronic components, semiconductors, etc…), with a minimum value of EUR 5000.
- In all other cases, it is possible to recover import VAT on DDP sales in Germany only if your company agrees to get register for VAT purposes in Germany. Therefore, it is better to start the VAT registration process before the shipment.
D. What are the requirements for import VAT refund in Germany ?
For the first two points mentioned above, the following conditions must be met:
- The overseas company (the shipper) should be the Importer of Record (IOR) or the “recipient” on the Customs document issued in Germany. To read more on the IOR requirements, please go on Prepare your shipment.
- The overseas business reclaiming import VAT refund (the shipper) is a taxable person in its 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 consumers, you are not eligible for import tax refund under the present procedure. Please contact us to set up an alternative solution.
- 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 27 others 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 | Norway | Oman | Qatar | Pakistan | St. Vincent | San Marino | Serbia | Saudi Arabia | Solomon Islands | Swaziland | Switzerland | United Arab Emirates | U.S.A | Vatican City.
If your country is not listed, please contact us for an alternative solution or read below.
F. What alternative means can we use to reduce import VAT in Germany?
Some overseas companies are reluctant to register for VAT in Germany because they do not want to charge local VAT to their German customers, offering them in this way a real advantage in terms of cash flow.
Such foreign suppliers can chose to use the “Single Point of Clearance”, a procedure available for exports to EU countries. This special customs scheme allows exporters to recover import VAT paid on a DDP delivery into Germany, while offering to their clients the benefit of VAT exemption on their purchases.
For further details on this special procedure, feel free to contact us or read the outlines of Single Point of Clearance as a tax reduction scheme.
G. Is VAT refundable when the goods imported into Germany are not sold ?
Even if your company is not selling goods imported into Germany (i.e. there is no transfer of ownership), it can still recover import VAT provided that certain legal requirements are met.
The following cases are concerned:
- Goods imported for international tradeshows or exhibitions (i.e: Temporary Importation)
- Goods imported for repair, alteration or processing (i.e: Inward Processing Relief)
- Goods imported under a hire or leasing contract (e.g: Equipment Lease Agreement)
- Goods imported for warehousing before sale (e.g: Storage for e-commerce purposes)
- Goods imported as technical equipment (e.g: Measuring instruments)
For further details on your specific case please contact us
H. How long does it take before receiving the VAT refund in Germany ?
In Germany, the Tax authorities investigate on each case and make a decision generally within 6 to 12 months after having received all the documents requested. We remind you that this is an average time limit provided for information purposes only.
I. Further help or advice ?
The content published here above is based on information timely as of 1 January 2014, 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.