Reclaiming German VAT by a UK business
German VAT is called ‘Umsatzsteuer’, or ‘USt’. It is also sometimes known as ‘Mehrwertsteuer’, or ‘MwSt’. It can sometimes be charged to a UK business buying German goods or services. Is there any way to claim this tax back?
A UK business buying goods from Germany, which are exported to the UK, cannot reclaim German VAT from HMRC by including it on its regular UK VAT return. Instead, it should give the German supplier its UK VAT registration number so that USt does not get charged in the first place. If the UK business is not registered for VAT, there is no way to reclaim any USt that is charged.
In some cases, a UK business which is VAT-registered may be able to claim back USt charged on goods and services under a special refund scheme set up by the EU 8th VAT Directive.
Qualifying for an 8th VAT Directive refund from Germany
The main conditions are:
- The UK business must not be registered for USt, nor be liable to be registered;
- If the UK business has a physical presence in Germany, it must only be a branch office not entered in the Commercial Register;
- The UK business must not be making any supplies which are within the scope of German VAT, although the following can be ignored:
- Services which are covered by the reverse charge mechanism. This includes Schedule 5 services which are deemed to be supplied in Germany because the customer is based there. Generally speaking these are ‘intangible’ or ‘intellectual’ services such as royalties, advertising, consultants, professional services, banking, insurance etc.
- Certain tax exempted cross border transportations or ancillary services from/to non-EU countries;
- Certain electronically supplied services.
Therefore, the scheme is intended to cover expenses received and consumed entirely within Germany itself. Common expenses on which USt is reclaimed include hotels, subsistence, entertainment, advertising, professional fees, training courses, exhibitions and conferences.
The scheme can also be used to reclaim USt on goods imported into Germany from outside the EU, but only if there is no other way available of reclaiming it. If importing the goods into Germany results in the business having a fixed establishment in Germany, or in having to register for USt, then this scheme cannot be used as the main conditions above would be breached.
USt cannot be reclaimed on:
- Goods which are for export from Germany;
- Expenses which were not incurred for business purposes;
- Expenses connected with an exempt business activity;
- Goods imported into Germany for onward sale in Germany;
- Goods and services for the direct benefit of travellers (such as hotel accommodation), which have been bought for resale.
The reclaim procedure
The time limit for making a claim is 30 June following the calendar year in which the USt was incurred. Claims are normally made for periods of 3 months or a year. A claim for a 12-month period must not be less than €25, and a claim for a 3-month period must not be less than €200. Expenses not claimed in one quarter may usually be included in a later claim in the same year.
The claim must enclose original invoices or import documents that prove that USt has been paid. Photocopies are not normally accepted. The papers are stamped and returned once the claim has been processed.
The first claim in every 12-month period must also be accompanied by a UK VAT66 certificate to prove that the business is registered for VAT in the UK. The original certificate must be sent, rather than a photocopy. If the business is using a trading name that is different from the name of the business that is registered for VAT, and any of the invoices are made out to the trading name, the certificate will also need to show this trading name. Certificates may be obtained by applying to:
National Registration Service
VAT 66 Section
62 - 70 Tettenhall Road
Wolverhampton WV1 4TZ
Fax: 01902 392202
The address to send the completed USt application form, VAT 66 certificate and invoices is:
Bundeszentralamt für Steuern
Passower Chaussee 3b
The German government has 6 months to make the repayment or to say why the repayment cannot be made. A quick response should not be expected.
From January 2010, a new system will be implemented whereby German VAT will be reclaimed online.
Please note that are no longer taking on any new overseas clients or UK clients with significant overseas interests, and we do not give free advice by email or telephone.
Looking for a more general overview of VAT between the UK and Germany?