Foreign companies supplying goods combined with installation or assembly services in Germany may face obligatory VAT registration, even if they have no permanent establishment.
Understanding these rules is critical for proper VAT compliance.
At WW+KN and www.vat-germany.com, we advise international companies when VAT registration becomes mandatory for project-based activities in Germany.
1. Legal Basis: Supply and Installation in Germany
The relevant legal framework is based on:
- § 3 Abs. 7 Umsatzsteuergesetz (UStG) — defining supplies involving installation or assembly
- § 3a Abs. 2 UStG — determining the place of supply for services related to immovable property (construction and installations)
If a foreign company supplies goods and performs substantial installation or assembly services in Germany:
- The transaction is considered a local supply in Germany.
- German VAT must be charged.
- VAT registration in Germany becomes mandatory for the foreign company.
According:
- § 3 Abs. 7 Satz 1 Nr. 1 UStG (supply with installation/assembly)
- § 3a Abs. 2 UStG (place of supply rules for immovable property)
2. Examples When VAT Registration Is Required
Typical cases include:
- Installation of industrial machinery by a Swiss or US company in a German factory
- Assembly of laboratory equipment by a UK company in a German research center
- Setting up a data center’s IT infrastructure by a foreign tech supplier
In these situations:
- The foreign supplier must register for VAT in Germany
- Issue German VAT invoices to the German customer
- File VAT returns in Germany
The reverse charge mechanism does not apply if the foreign company carries out substantial installation work — direct VAT registration is required.
3. Consequences of Failing to Register
Failure to register and properly account for German VAT can lead to:
- Penalties and interest charges
- Denial of input VAT deductions for the customer
- Reputational risks and business disruptions
German tax authorities strictly monitor installation and construction activities carried out by foreign companies.
4. Documentation Requirements
Foreign suppliers must:
- Register for VAT before starting taxable activities
- File monthly or quarterly VAT returns
- Keep proper documentation (contracts, delivery notes, acceptance reports)
How WW+KN and www.vat-germany.com can Assist
We support foreign businesses with:
- Determining VAT registration obligations
- Preparing and submitting VAT registration applications
- Managing ongoing VAT compliance (returns, invoices, corrections)
- Handling communication with German tax offices
Get in Touch
For VAT advice on installation and assembly activities in Germany, please contact info@vat-germany.com.
