- Sales Tax: Various Rates, Deadlines, Obligations and Possibilities
- March 24, 2015 | Author: Michael Rainer
- Law Firm: GRP Rainer LLP - Frankfurt am Main Office
- Every citizen comes into contact with sales tax, also referred to as turnover tax, on an almost daily basis, as it is payable on every purchase and service.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: There are two different rates in Germany for sales tax / turnover tax. The general rate is 19 per cent and the reduced rate 7 per cent. The reduced rate applies, for instance, to hotel stays, in artistic and media professions and also to many foodstuffs. Particularly regarding foodstuffs, however, it is confusing and frequently unclear which sales tax rate applies. For example: the reduced rate of seven per cent applies to fresh fruit, whereas 19 per cent is payable on fruit juices.
But irrespective of the tax rate, sales tax is always paid by the customer. Companies are obliged in all but a few cases to include sales tax in their invoices to customers and pay this to the tax authorities. This normally takes place in the context of the regular advance turnover tax return. In the advance return both the sales tax which has been taken from sales or services and that which has already been paid with respect to business-related purchases (input tax) are declared. The difference between these two amounts has to be paid to the tax authorities.
A distinction needs to be made here between nominal taxation and actual taxation. In general, nominal taxation applies. This means that the sales tax has to be paid as soon as the invoice has been presented to the customer. When the invoice is actually paid is irrelevant here. In the case of actual taxation, on the other hand, sales tax does not have to be paid until the invoice has been paid by the customer. This applies to the liberal professions as well as companies required to keep accounting records whose turnover in the previous year was not above 500,000 euros. A corresponding application has to be submitted to the tax authorities.
In the case of start-up businesses, advance turnover tax returns must be submitted monthly during the first two years. Otherwise, quarterly advance turnover tax returns are sufficient in most cases.
The statutory regulations for sales tax are extensive and not always comprehensible for laymen. In order to avoid problems with the tax authorities, it is helpful to consult experienced tax advisors from the outset. In the event of a dispute, lawyers experienced in the field of tax law can also provide further assistance.