Mehrwertsteuer (VAT) in Germany: The Complete Guide for Freelancers & Small Businesses

If you sell goods or services in Germany, you will run into “Mehrwertsteuer” sooner or later. This guide explains what it is, when you must charge it, how the 19% and 7% rates work, what “Vorsteuer” means, how to file the Umsatzsteuervoranmeldung (UStVA), and how cross-border rules like reverse charge and OSS fit in. 

What is Mehrwertsteuer?
Mehrwertsteuer (VAT) is a consumption tax added to most goods and services in Germany—typically 19% or 7%—collected by businesses and ultimately paid by the final consumer.

Mehrwertsteuer in a nutshell

Mehrwertsteuer is charged on the value you sell to your customers. In practice, the consumer pays VAT on the price they see. At the same time, you collect it, record it on invoices, and periodically pay it to the tax office after subtracting any deductible input VAT (Vorsteuer) you spent on your own business purchases.

Germany has two main VAT rates: the standard rate of 19% and the reduced rate of 7% for specific items such as most books and many foods, as listed in the law. Some transactions are exempt. The legal basis for these rates is § 12 Umsatzsteuergesetz (UStG).

To work with the math, remember two quick conversions:

• Net → Gross (19%): net × 1.19

• Gross → Net (19%): gross ÷ 1.19
  (Replace 1.19 with 1.07 when the 7% rate applies.)

These formulas keep you consistent when quoting prices or reconciling invoices.

Mehrwertsteuer or Umsatzsteuer: Is there a difference?

No—there is no difference. Legally, the tax is defined in the Umsatzsteuergesetz, and the correct legal term is Umsatzsteuer. In everyday language, on receipts, and in shop signage, you will often see Mehrwertsteuer (MwSt). Use “Umsatzsteuer” on invoices and in official communications; “Mehrwertsteuer” is perfectly fine in marketing copy and customer-facing pages, as long as your invoices are compliant with the law.

Mehrwertsteuer, Umsatzsteuer und Vorsteuer: how they relate

Think of these as perspectives on the same tax:

• When you sell, you charge Umsatzsteuer on your net price and show it on your invoice.

• When you buy something for your business and pay VAT to the supplier, that VAT appears to you as Vorsteuer (input VAT).

• In your periodic return, you pay the difference: charged VAT (on your sales) minus deductible Vorsteuer (on your costs). If Vorsteuer exceeds the VAT you charged, you will receive a refund.

A simple example: In January, you issue €3,000 net in invoices at 19% (so €570 VAT collected). You also buy a new laptop for €1,000 net plus €190 VAT. You owe the tax office €570 – €190 = €380 for January (ignoring other items). That difference is the VAT on your “value added”.

Be mindful that you generally cannot deduct Vorsteuer if all of your outputs are VAT-exempt (e.g., many medical services). With mixed activities, talk to a professional about partial deduction rules.

Who must charge VAT in Germany?

Most businesses that are not VAT-exempt must register and charge VAT. One important exception is the Kleinunternehmerregelung (small-business scheme). Since 2025, the thresholds have been updated: you can qualify if your prior-year turnover did not exceed €25,000 and your current-year turnover does not exceed €100,000. For new businesses in their first calendar year, the decisive limit is €25,000. Under this scheme, you do not charge VAT on invoices, but you also cannot deduct Vorsteuer. (Bundesministerium der Finanzen, Industrie- und Handelskammer)

Separate from the small-business scheme, some activities are VAT-exempt under § 4 UStG (for example, parts of healthcare, specific education, and financial services). Exemption affects both whether you charge VAT and whether you can deduct Vorsteuer.

VAT registration and your numbers: tax number vs USt-IdNr.

You will encounter two identifiers:

1. Your tax number (Steuernummer) issued by your local tax office is used for domestic filings.

2. Your VAT ID (USt-IdNr.) issued by the Bundeszentralamt für Steuern (BZSt) is used for intra-EU B2B trade and should appear on invoices to EU business customers. You request it online from the BZSt once you’re VAT-registered. (bzst)

If you sell only within Germany to consumers, a VAT ID is not always necessary, but many businesses request one early to be future-proof and to support EU B2B scenarios.

Pricing, invoices, and records

In B2C contexts (selling to consumers), German price display rules expect gross prices (including VAT). In B2B, showing net prices is common and acceptable as long as your invoices list the VAT rate and amount where applicable.

A proper invoice typically includes your legal name and address, the recipient’s information, your tax number or VAT ID (depending on scenario), a unique invoice number and date, a clear description of goods/services, delivery/performance date, the net amount, VAT rate and amount, the gross total, and—where appropriate—phrases indicating a special regime (e.g., “Reverse-Charge” or an exemption reference). Keep your invoices and supporting documents organized; they drive your UStVA and annual VAT return.

Filing VAT: the Umsatzsteuervoranmeldung (UStVA) and the annual return

How often do you file?
By default, the UStVA is filed quarterly. If your prior-year VAT due was more than €9,000 (effective from 2025), you must file monthly. If it was €2,000 or less (from 2025), the tax office may exempt you from advance returns altogether. For founders, the old rule of mandatory monthly filings in the first two years is suspended for 2021–2026; the general thresholds above decide your period. (finanzamt-bw.fv-bwl.de, Finanzamt Bayern, Bundesministerium der Finanzen, Industrie- und Handelskammer)

Deadlines and extensions.
Your UStVA is due by the 10th day after the end of the filing period (month or quarter). Many businesses apply for a Dauerfristverlängerung, which pushes the due date by one month (with a small special advance payment for monthly filers).

What actually gets filed and paid?
Each period, you calculate VAT on sales minus deductible Vorsteuer and pay the difference. At year-end, you file an annual VAT return to reconcile the year. The federal finance ministry publishes the official UStVA form layout each year; the 2025 pack also references updates around small-business rules and procedures.

Common mistakes to avoid.
Typical issues include applying the wrong rate (7% vs 19%), omitting reverse-charge lines for EU B2B services, failing to collect and store evidence for zero-rated exports, and mixing private and business expenses (which can block Vorsteuer).

Cross-border basics you should know

EU B2B: Reverse charge.
When you sell many services to VAT-registered businesses in other EU countries, the reverse-charge mechanism often applies: you issue an invoice without German VAT and add wording that the customer owes the tax in their country. This is anchored in § 13b UStG and related rules; always check whether your specific service falls under reverse charge and keep the customer’s valid VAT ID on file. (Industrie- und Handelskammer, Bundesministerium der Finanzen)

EU B2C: The One-Stop Shop (OSS).
If you sell to consumers in multiple EU states (e.g., digital services or distance sales of goods via your own shop), the OSS lets you report all those B2C sales in one quarterly return through a single portal instead of registering in each member state. It’s optional but very convenient once you cross relevant thresholds or ship to many countries. (VAT e-Commerce - One Stop Shop)

Exports outside the EU.
Exports are typically zero-rated in Germany, but you must keep proper evidence (e.g., customs export documents). Keep your paperwork tight—zero-rating is documentation-heavy.

Worked examples you can reuse

Example 1: Domestic service at 19%.
You design a logo for a Berlin startup for €1,000 net. You add €190 VAT and invoice €1,190 gross. In your UStVA period, you include €190 output VAT. If you also bought a printer for €200 net plus €38 VAT, you may deduct €38 Vorsteuer. The net VAT to pay for that period (considering just these two items) would be €190 – €38 = €152.

Example 2: Reduced-rate sale at 7%.
You sell a qualifying reduced-rate item for €500 net. VAT is €35, so the gross charge is €535. You still reconcile €35 against your deductible input VAT for the period.

Example 3: EU B2B service with reverse charge.
You provide a consulting service from Germany to a VAT-registered client in France. You show both VAT IDs on the invoice, charge €2,000 net, no German VAT, and add a note such as “Reverse charge—customer is liable for VAT”. You report this correctly in the UStVA and the EC Sales List (Zusammenfassende Meldung) where applicable. (Industrie- und Handelskammer)

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