Taxable Persons

Taxable persons refer to individuals or businesses that engage in taxable activities, such as the supply of goods or services, and are required to pay taxes on the income generated from those activities. This includes both residents and non-residents who carry out taxable activities in Germany.

Established Entities

In Germany, there’s no set threshold for VAT registration. Once an individual starts a taxable activity in the country, they are obligated to inform the German VAT authorities of their registration duty.

Yet, small businesses based in Germany can be exempted from submitting VAT returns or making VAT payments if their overall revenue stays below the limits set for small enterprises.

Foreign Entities

Foreign businesses that provide goods or services subject to German VAT are generally obligated to register for VAT in Germany. If a foreign business has a permanent establishment in Germany, it must notify the Tax Office that it will also carry out transactions subject to VAT, in addition to its other tax obligations.

However, if the business only provides inbound business-to-business services that are subject to reverse charge, it may avoid registration. On the other hand, if a foreign business performs an intra-Community acquisition in Germany, it must register for VAT.

In Germany, there’s no threshold for registration, meaning any entity engaged in taxable transactions needs to register for VAT.

Mandatory Registration

In Germany, registration for taxation is mandatory for all individuals or businesses engaging in taxable activities.

Once registered, the individual or business will be assigned a tax number, which must be used in all tax-related transactions. The tax number is unique to each individual or business and helps the tax authorities to track their tax obligations and payments.

Exemptions from Registration

There is no specific exemption from VAT registration in Germany. All businesses that make taxable supplies in Germany are generally required to register for VAT. 

Group and Divisional Registration

The term “Organschaft” refers to the legal concept of fiscal unity or VAT grouping in Germany. It allows financially, economically, and organizationally integrated companies to be treated as a single taxable entity for VAT purposes.

• Group Registration

Under the VAT Act, a controlling company and its subsidiaries can form an Organschaft if the controlling company owns at least 50% of the shares of the subsidiaries, and the subsidiaries are fully integrated into the controlling company’s business activities. The subsidiaries must also agree to the VAT grouping and cannot be registered for VAT.

Once an Organschaft is established, the controlling company is responsible for fulfilling all VAT obligations on behalf of the subsidiaries. This includes charging VAT on the supplies made by the subsidiaries, as well as submitting VAT returns and paying VAT to the tax authorities.

• Divisional Registration

Under German VAT regulations, it is not possible for branches to register for VAT separately. Therefore, a branch cannot register for VAT separately from its parent company. Thus, any transactions carried out by the branch, whether it is selling goods or services, or purchasing goods or services, will be accounted for by the parent company in its VAT return.