Anyone who founds a corporation must pay VAT.

Anyone setting up a corporation should keep an eye on all taxes. One of these taxes is VAT. Here you will find an overview of the most important questions relating to VAT:

• What is turnover tax?
• Who has to pay sales tax?
• What is the VAT rate?
• How do you collect VAT correctly?

Almost all consumer goods and services in Germany are taxed with VAT. This tax is generally paid by the consumer. The regular tax rate is either 19% or 7%, depending on the goods and services. However, as an entrepreneur, you do not keep this tax revenue yourself; it is paid to the tax office and thus to the state.

Anyone who sells goods or services to consumers must also pay VAT. § Section 1 (1) no. 1 of the German Value Added Tax Act specifies that deliveries and other services that an entrepreneur carries out in Germany in return for payment as part of their business are taxable.
However, this does not mean that you are always liable for VAT. If you are a small business owner and your turnover is within a certain allowance, you are exempt from VAT.

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In Germany, there are two different tax rates that can be levied on goods and services: 19% and 7%.
The so-called standard tax rate is 19%. This tax rate applies to ‘higher value’ goods and services. These include, for example, vehicles, shoes, clothing, medicines and much more. Basic necessities, on the other hand, are taxed at a reduced rate of 7%. These include, for example, tap water, hotel accommodation, cinema tickets and travel tickets.

It is advisable to always state the relevant tax rate on your invoices, including your tax number. In addition, entrepreneurs are obliged to keep records. You can fulfil this obligation by keeping invoices and accounting documents for at least ten years.