blog
12/07/2024

Understanding Import VAT in Germany for Foreign Companies

Import VAT (Einfuhrumsatzsteuer) is a significant aspect of VAT regulations in Germany, especially for foreign companies importing goods into the country. This guide provides an overview of when import VAT is due, its implications on the place of supply, and practical steps for compliance.

When is Import VAT Due?

Import VAT is generally payable upon the importation of goods into Germany. The due date for import VAT is typically aligned with the customs clearance process:

  • Payment Timing: Import VAT must be settled before the goods are released from customs. This ensures that the goods can enter free circulation within the EU.
  • Deferment Options: Germany offers a deferment scheme where import VAT payment can be postponed until the 26th day of the second month following the importation. This deferment helps improve cash flow for businesses.

Determining the Place of Supply

The place of supply for VAT purposes is crucial as it determines where VAT is chargeable:

  • Imports: For goods imported from non-EU countries, the place of supply is Germany if the goods are cleared through German customs. Import VAT is calculated based on the customs value, which includes the value of the goods, transport costs, customs duties, and other associated costs.
  • Effect on Domestic Transactions: Once import VAT is paid, the goods are in free circulation within the EU, and any subsequent supply of these goods within Germany is subject to the standard VAT rules applicable to domestic supplies.

Impact of Import VAT on Foreign Companies

For foreign companies importing goods into Germany, import VAT has several implications:

  • VAT Registration: Foreign companies must be VAT registered in Germany to import goods and account for import VAT. This is necessary to reclaim the import VAT as input tax, which can be offset against VAT liabilities on subsequent sales.
  • Customs Procedures: Proper customs documentation is crucial. The customs value must be accurately declared to ensure the correct amount of import VAT is calculated. Any errors in customs documentation can lead to delays, penalties, or additional costs.
  • Cash Flow Management: Utilizing the deferment option for import VAT can significantly ease cash flow challenges. This allows businesses to manage their finances more efficiently by delaying the actual outlay of VAT funds.

Practical Tips for Compliance

  1. Ensure Accurate Documentation: Maintain precise and complete customs documentation to avoid any discrepancies during customs clearance.
  2. Leverage VAT Deferment: Apply for VAT deferment to improve cash flow. Ensure that your accounting systems are updated to track deferred VAT liabilities.
  3. Consult with Experts: Engage VAT consultants or tax advisors who specialize in German VAT regulations to navigate the complexities of import VAT and ensure full compliance.
  4. Use Customs Warehousing: Consider using customs warehousing or other suspensive customs procedures to defer VAT and duty payments until the goods are released for sale or use within the EU.

For detailed guidance and assistance with import VAT compliance, you can contact WW+KN, a Baker Tilly Company, at info@vat-germany.com. Our team of experts can help you navigate the complexities of VAT regulations and optimize your import processes.