German VAT for foreign businesses

Foreign businesses that store goods in Germany or supply German private customers are often subject to German VAT obligations even though they do not have an establishment there. The relevant rules have changed several times in recent years, and a further change is due at the turn of 2026/2027. This article summarises the rules currently in force and what businesses can expect from 2027.

 

When VAT registration in Germany becomes mandatory

VAT registration in Germany is triggered not by a level of turnover, but by a transaction or activity. The two most important cases in practice are:

Stock held in Germany. As soon as a business holds goods in a German warehouse and sells them from there, it must register for VAT. This applies regardless of turnover and regardless of whether the warehouse is operated by the business itself or provided by a service provider. A marketplace operator’s fulfilment warehouse counts in the same way as the business’s own warehouse.

Distance sales to German private customers. If a business supplies private individuals in Germany from another EU Member State, the place of supply shifts to Germany once the EU-wide distance-selling threshold of EUR 10,000 is exceeded. The business must then either register in Germany or use the One Stop Shop (OSS) scheme.

 

The most common misconception: the EUR 10,000 threshold does not apply to everyone

In practice, the EUR 10,000 distance-selling threshold is regularly applied to businesses that are not eligible for it.

Under Article 59c(1)(a) of the VAT Directive, as implemented in section 3c(4) of the German VAT Act (UStG), the threshold requires the supplier to be established in only one Member State. A business established in a non-EU country is not established in any Member State and therefore does not meet this requirement.

The practical consequence is that there is no de minimis threshold for a business from the United Kingdom, Switzerland, the United States or China. Its turnover is taxable in the country of destination from the first euro. A non-EU business that relies on the EUR 10,000 threshold will register too late.

 

Filing frequency: the thresholds were increased in 2025

The frequency of VAT advance returns is determined by the VAT liability for the previous year. These thresholds were increased on 1 January 2025:

• Prior-year VAT liability above EUR 9,000: monthly VAT advance returns
• Prior-year VAT liability between EUR 2,000 and EUR 9,000: quarterly VAT advance returns
• Prior-year VAT liability up to EUR 2,000: The tax office may exempt the business from the obligation to file VAT advance returns. There is no legal entitlement to an exemption; the decision is at the authority’s discretion.

The former thresholds of EUR 7,500 and EUR 1,000 can still be found in numerous online publications. They have been outdated for more than a year and a half.

 

What changes on 1 January 2027

This is the key development for businesses planning to register.

Under section 18(2), sentence 4, UStG, a newly established business is required to file monthly returns in the year in which it commences its activities and in the following calendar year. However, section 18(2), sentence 6, UStG suspends this rule for the tax periods 2021 to 2026.

During the suspension period, the filing frequency for a new business is based on the VAT liability it expectsfor the current year, as stated in the tax registration questionnaire. A business with low expected turnover may therefore file quarterly returns from the outset.

Under the legislation currently in force, this suspension expires at the end of 2026. Unless the legislator extends it, the basic rule will apply again for tax periods from 2027: monthly returns for two years for every new registration, regardless of turnover.

What this means in practice. A business that is already planning to register and expects low turnover should not leave the filing frequency to chance. Over two years, the difference between four and twelve returns per year is significant, both in terms of administrative work and the risk of errors. We recommend checking the legislative position again in autumn 2026, as the suspension may still be extended.

 

Late-filing surcharge: the 10% cap no longer exists

This is another area in which outdated information persists. Numerous sources state that the late-filing surcharge is capped at 10% of the assessed tax. That wording comes from section 152 of the German Fiscal Code (AO) in the version applicable before the 2019 reform and is no longer current law.

The current rules are:

• Section 152(1) AO: In the case of a self-assessed tax return—and a VAT advance return is such a return—the imposition of the surcharge is at the tax office’s discretion.
• Section 152(5) AO:25% of the assessed tax for each commenced month, subject to a minimum of EUR 25 per month.
• Section 152(10) AO: The surcharge may not exceed EUR 25,000.

The minimum monthly amount often comes as a surprise in practice: where the tax liability is small, the relevant factor is not the percentage but the number of commenced months. A small amount of additional tax that remains outstanding for six months can result in a surcharge exceeding the tax itself.

 

What foreign businesses need in practice

Registration itself is only the beginning. It is followed by ongoing obligations: VAT advance returns at the prescribed frequency, the annual VAT return, the recapitulative statement where applicable, and all correspondence with the competent tax office. For foreign businesses, the main obstacle is not the tax itself but the language and the administrative process. All communication with the tax office is conducted in German and, to a large extent, still by post.

For precisely this situation, we operate Vaytax, a dedicated service for handling German VAT for foreign businesses in English, with tax advisory expertise provided in-house. A detailed description of the registration procedure, including the documents required depending on the country in which the business is established, is available under VAT registration for foreign businesses.

 

Conclusion

Three key points:

1. The registration obligation is triggered by holding stock or making distance sales, not by a turnover threshold.
2. The EUR 10,000 distance-selling threshold is not available to non-EU businesses. For them, taxation in the country of destination applies from the first sale.
3. Under the legislation currently in force, the suspension of the two-year monthly filing requirement for newly established businesses expires at the end of 2026. Anyone registering in 2027 should plan for monthly filings.

If you have any questions about registration or ongoing VAT compliance, please contact us.

 

This article reflects the law as at August 2026 and does not constitute advice for any individual case.