Jaroslav Plotnikov

IT Freelance in Germany – 3 main tax types – #1 VAT

In this article: Value added tax, turnover tax and input tax. How to get 19% of paid VAT back from the state?

Picture: Jaroslav Plotnikov

Read this in Russian ПО-РУССКИ

There are two types of taxation for you: regular taxation (Regelbesteuerung) and taxation under the Small Business Regulation* This article is about regular taxation.

 

Turnover tax vs VAT

Turnover tax (USt.) and value added tax or VAT (MWSt.) are almost the same in Germany. The umbrella term VAT includes input tax (Vorsteuer) and turnover tax (Umsatzsteuer).

Value Added Tax (VAT) is a tax that is levied on the payment of the price of supplies, sales of products and other services provided by entrepreneurs within Germany. The tax rate for IT industry is 19%.

EXAMPLE (s. screenhot above):

You are in Germany and buy a notebook as a work tool for your company. The price also includes 19% VAT. In your annual tax declaration, 19% of your business expenses will be deducted.

Note that 19% VAT is only levied on services within Germany. If the billing address is outside Germany, 19% sales tax is not charged.

 

Turnover Tax and Input Tax 

Input tax (Vorsteuer) is the just a VAT your company pays on the purchase of products and services.

Umsatzsteuer = tax that your company pays when you sell
Vorsteuer = tax that your company pays when you purchase

The input tax (Vorsteuer) that you pay and the turnover tax (Umsatzsteuer) that you receive is calculated at the end of each month. Later at the end of each quarter. This document – advance VAT return (Umsatzsteuer-Voranmeldung) is to be sent to the tax office and checked there.

 

If you have collected more taxes than you have paid, you will have to pay VAT in advance. It called USt.-Vorauszahlung. That means you have to deposit money to the tax office.

If you have paid more taxes than you have collected, you will get a VAT credit. There will be so called USt.-Überschuss. That means tax office owes you money.

If the billing address is outside of Germany, no 19% will be charged. In this case you must mention “Nettobetrag ohne MwSt”** on your invoice. 

My advice. Deposit 40% of each earnings to a separate bank account, you are 100% protected – with such a strategy you will never have trouble with tax authorities or tax consultants.

Perhaps also interesting for you: Wie ich Steuer zahlte ohne Steuersystem zu verstehen


*- s. article IT-Freelance in Germany: Small Business Regulation

** – English: “net amount without VAT”.

Quellennachweis: Wikipedia und Wikipedia /

 © 2018 Jaroslav Plotnikov ( All articles )

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