German VAT Refund Guide

For online sellers doing business in Germany, handling German VAT is important. If you are VAT-registered in Germany, understanding how VAT refunds work can help you optimize your cash flow. This guide will walk through the process of German VAT refunds.

VAT Refund for Sellers Already VAT-Registered in Germany

If you already have a German VAT number, your VAT refund goes through your regular VAT filings.

When Are VAT Refunds Triggered?

1.Receipt of a VAT refund letter from the German tax authority: The German tax office might send you a letter about a refundable balance. This usually happens when the tax authority finds overpaid VAT or remaining funds from previous filings.

2.Your VAT filings show a negative payable amount: This happens when the VAT you have paid (input VAT) exceeds the VAT you have collected from sales (output VAT). If you have paid more amounts of VAT on purchases, imports, or business expenses than your sales VAT, your tax calculation will result in a negative balance.

How to Handle VAT Refund Letters from the Tax Authority?

After receiving a VAT refund letter from the German tax authority, you have two ways to handle the refundable amount.

1.Carry the refundable balance forward to the next filing period: If the letter mentions using the balance for your next filing period, you don't need to take further action. If the tax letter does not mention it, you can notify the tax office to confirm the carryover.

2.Request the refund to your bank account: If you wish to have the refundable amount transferred to your bank account, follow the instructions provided in the tax office’s letter. You need to fill out the form, add your bank details, and include your legal representative's signature.

It is important to respond to the tax authority promptly. Delayed responses or missing information would result in reminders and leave a negative impression with the tax authority.

How Often Can You Claim VAT Refunds?

You can claim VAT refunds after each filing period if you have a negative VAT balance. This means you’ll have the opportunity to recover excess VAT regularly, as part of your ongoing tax compliance efforts.

For Sellers Not VAT-Registered in Germany

If you are not VAT-registered in Germany but have incurred VAT expenses (e.g., on imports, warehousing, or other services), you may still be able to recover VAT. However, this requires using one of two specific refund mechanisms, depending on your business’s location.

For EU-based sellers:

If you are registered in another EU country, you can claim back VAT paid in Germany through the EU Refund Claim procedure (formerly known as the 8th Directive). Submit your application through your home country's tax portal. The deadline is September 30 of the year after the invoice date.

For non-EU sellers:

German VAT refunds are governed by the EU 13th Directive. Submit your application directly to the German tax authority, along with supporting documentation such as invoices and payment records.

Both methods require that you are not VAT-registered in Germany, and refunds can only be claimed for VAT legitimately incurred in connection with your business operations. German VAT reclaims must be submitted by June 30 of the year after the invoice date. If this deadline is missed, then the VAT is lost.

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