Tax obligations for foreign companies in Germany

Foreign companies that are economically active in Germany must fulfill certain Tax obligations fulfill. These depend on whether the company has a Establishment, a permanent establishment or only economic activities (e.g. online trading) in Germany.

1. when is a foreign company subject to tax in Germany?

A company based abroad may be liable for tax in Germany if it:
One Permanent establishment or subsidiary in Germany has
Goods imported into Germany and sold
Services for German customers provides
In Germany Employees employed
owns real estate in Germany.

Tip: Even without a registered office in Germany, a company can be liable for VAT!

2. important types of tax for foreign companies

a) Value added tax (VAT)

Set: 19 % (reduced 7 % for certain products, e.g. food, books)
Obligation for foreign companies if:
goods are imported into and sold in Germany
services are provided to private customers
A warehouse in Germany is used (e.g. Amazon FBA)

Value added tax identification number (VAT ID)

• Necessary for intra-Community deliveries
• Application to the Federal Central Tax Office (BZSt)

Reverse charge procedure

• If benefits are paid to a German company are provided, the Tax liability transferred to the customer (the customer pays the sales tax).

b) Corporate income tax (for corporations such as GmbH, AG)

Set: 15 % + 5.5 % solidarity surcharge
Applies to:
German subsidiaries of foreign companies
Foreign companies with a permanent establishment in Germany.

c) Income tax (for sole proprietorships & partnerships)

Set: Progressive from 14 % to 45 % (depending on win amount)
Mandatory for foreign sole proprietors or partnerships operating in Germany.

d) Trade tax

Set: 7-17 %, depending on the city
Mandatory for companies with a Operating site in Germany
Does not apply to companies without a branch in Germany.

3. tax registration for foreign companies

Step 1: Tax registration with the tax office

• Registration with the Questionnaire for tax registration
• Responsible tax office depends on the location of the activity

Step 2: Apply for VAT registration & VAT ID no.

• At the Federal Central Tax Office (BZSt)
• If reverse charge is not possible, the company must calculate and pay the VAT.

Step 3: Pay taxes

• Monthly or quarterly advance VAT return
• Annual tax return.