Sales Tax in Germany


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Sales Tax in Germany is imposed on the goods of personal and public consumption. It generates the same influence on the tax system as is generated by any other tax on the economy. This tax is levied upon the sale of goods or services to a customer provided the customer is the final one to purchase the good or service. This is an indirect tax. Basically the sales tax should be paid by the company which is manufacturing goods. However, the company charges it with the market price which it sets for the customer of the good. The buyer is not directly liable to pay this tax.

The German Law recognizes two types of tax rates. They are:

  • The general tax rate which is fixed at 16%. However, this has increased from January and has become 19%
  • There is the reduced rate also which is fixed at 7%

Taxation in Germany has witnessed a number of changes in the tax rates. In 2006 the government took the decision to increase the sales tax rate. It was implemented from 2007 January at the rate of 3% points making it 19 % on the whole. However it was feared that this increase would cast a negative impact on the economy. It would affect the consumers. According to the retailers the decision of increasing the tax rate would slow down the economic progress. The experts had observed that in case of a continuous rise in the sales tax percent takes place the negative growth in the expenditure of the consumer will also be noted.

This increment would yield € 15 billion. However, this would cause no damage to the investment sector. Funds could be gathered alternatively from sources like subsidies and tax reductions.

However, there are special provisions for people outside EC Union who indulge themselves in shopping. These people can buy anything they wish to without paying any sales tax. There are various aspects on which one does not have to pay sales tax. Tax reduction will take place under the following circumstances.

  • If one is a resident of the Third World country provided he/she can prove the fact by showing the required documents
  • If one does not have a residence permit, one can reside in the country without any permission for three months but not after that.
  • If one exports his goods within the time of 3 months as his/her personal luggage. Whatever one has to export have to be done in the presence of the person. If the things are arriving by post afterwards then the conditions do not apply.
Exceptions to Tax Reduction

There are certain exceptions to the tax exemptions. Certain cases do not figure under tax reduction. They are:

  • If one has resided in Germany for a considerable period of time he/she has to pay for the services he has availed in Germany like hotel and restaurant bills, train and bus fares.
  • One uses certain instruments or objects for the personal purpose.
  • Any kind of motor oil, fuel are exceptions

One pays the whole of the sales tax when he/she buys anything but the retailer returns the amount spent in paying the tax provided one has shown all the documents and has convinced the person about his identity.

The system of sales tax in Germany is a simple one without any hassles for the payers.