13 About Tax Requirements

This chapter contains the topic:

13.1 Overview to German Tax Requirements

Germany is part of the European Union (EU), which observes the Single European Act of 1987. The Single European Act is an agreement that opens markets to an area without internal frontiers (boundaries) in which free movement of goods, persons, services, and capital is assured in accordance with the provisions of the Treaty of Rome.

Although day-to-day business activities in Germany are the same as those for businesses in countries that are not EU members, businesses in Germany must adhere to EU requirements. For example, to help monitor the trade among members of the EU, businesses that exceed the limit of intra-union trade must submit the following reports to the customs authorities:

  • EU Sales Listing (Zusammen Fassende Meldung or ZM)

  • Intrastat Report

There are also significant differences regarding the specifics of how value added tax (VAT) is handled.

J.D. Edwards solutions for tax requirements in Germany consist of the following tasks:

  • Entering journal entries with tax

  • Printing the EU Sales Listing

  • Working with Intrastat requirements

  • Printing value added tax (VAT) reports

  • Working with VAT reconciliation

13.1.1 About Value Added Taxes (VAT)

Umsatzsteuer or Mehrwertsteuer (also known as value added tax or VAT) is a noncumulative tax that is imposed at each stage of the production and distribution cycle.

If you work with VAT, you should understand the following terminology and principles:

Terminology Explanation
Output VAT Suppliers of goods and services must add VAT to their net prices. They must record output VAT for goods on the date that they issue invoices and for services on the date that they receive payment.
Input VAT Input VAT is the VAT paid by the purchaser of goods and services to the supplier. If the purchaser is subject to VAT of sales (output VAT), they can offset the input VAT they owe against any output VAT that they owe.

Input VAT is generally recovered by offsetting it against output VAT. When input VAT exceeds output VAT, the purchaser can obtain a cash refund.
Non-recoverable Input VAT Input VAT cannot be recovered the following:

  • Goods and services that are not necessary for running the business

  • Expenses that are related to business entertainment

  • Transport of persons

  • Oil-based fuels and lubricants that are transformed and then resold

  • Goods that are provided free of charge or at a substantially reduced price

  • Purchase of cars

  • Services related to goods that are normally excluded from the right of recovery
VAT Returns VAT returns must be completed for each month by the tenth day of the following month and filed with the local tax office.

You must pay any excess output VAT over input VAT at the time of filing.
VAT exemptions In Germany, the following transactions are non-taxable:

  • Transactions within the same entity

  • Transactions for the transfer of business

  • Transactions for subsidies, penalty payments, and compensation