What is Umsatzsteuer?

Umsatzsteuer is Germany's implementation of EU VAT and is levied at two rates. The standard rate of 19% applies to most goods and services. The reduced rate of 7% applies to food and agricultural products, books and newspapers, public transport (short-distance), hotel accommodation, cultural performances, and certain other categories. A temporary COVID-era reduction to 16%/5% expired in 2021.\n\n**Registration**\nThere is no mandatory registration threshold for German businesses — in principle, all businesses are subject to USt unless they qualify for the Kleinunternehmerregelung (small business exemption). Businesses using the Kleinunternehmer exemption (below €22,000 prior year / €50,000 current year) do not charge USt and cannot reclaim Vorsteuer. New businesses can opt into USt registration voluntarily from day one, which is usually advantageous when they incur significant start-up costs with input VAT.\n\n**Voranmeldungen (advance returns)**\nUSt is reported and paid periodically via the Umsatzsteuer-Voranmeldung:\n- Monthly: if prior year USt liability exceeded €7,500\n- Quarterly: if prior year liability was €1,000–€7,500\n- Annual only: if prior year liability was below €1,000\nMonthly Voranmeldungen are due on the 10th of the following month; quarterly returns are due on the 10th of the month following the quarter end. Businesses can apply for a permanent extension of one month (Dauerfristverlängerung) for a prepayment of 1/11th of the prior year's total liability.\n\n**Annual USt declaration**\nSeparate from the Voranmeldungen, businesses must file an annual Umsatzsteuererklärung by 31 July (extended to end of February with Steuerberater). This reconciles the advance payments.\n\n**Reverse charge (§13b UStG)**\nFor B2B services from EU businesses and for construction services, the recipient accounts for USt via the reverse charge mechanism. The supplier invoices net without USt; the buyer self-assesses the tax and simultaneously claims it as Vorsteuer — a net-neutral transaction for VAT-registered buyers.\n\n**ELSTER filing**\nAll Voranmeldungen and annual declarations must be submitted electronically via ELSTER (the German tax e-portal). Paper filing is not accepted for USt.