In Germany, value-added tax (VAT) typically constitutes part of the mandatory information that must be included on a compliant invoice. However, tax law also provides for certain exceptions where VAT must not be indicated or is optional. It’s important that businesses in Germany be aware of these special cases in order to issue invoices correctly and avoid tax penalties.

In this article, you’ll learn when businesses in Germany can issue invoices without VAT, as well as which regulations apply when invoicing within Germany, within the EU, or to a third country (i.e., a country outside the EU). You’ll also learn about cases where the liability for VAT shifts to the recipient of the goods or services. Plus, you’ll get an overview of the mandatory invoice information for various special tax situations, as well as the most common causes of back tax assessments.

Key takeaways

• In exceptional cases, businesses in Germany can issue invoices without VAT.
  
• Invoices without VAT are permissible for small-scale entrepreneurs, in cases of certain tax exemptions, and for cross-border supplies of goods and services.
  
• Different regulations apply to tax exemptions within Germany, within the EU, and for transactions involving third countries.
  
• The reverse charge procedure shifts the VAT liability to the recipient.
  
• Errors in the application of the tax rules can result in additional tax assessments by the tax authorities.
  

In what cases can businesses in Germany issue invoices without VAT?

Whether an invoice is issued with or without VAT depends on various tax regulations. The absence of VAT on an invoice does not automatically mean that the invoice is incorrect or incomplete. VAT law expressly defines certain circumstances under which VAT must not be charged or is optional.

Key cases include:

• Application of the small-scale entrepreneur rule according to Section 19 of the German VAT Act (UStG)
  
• Certain tax-exempt transactions
  
• Intracommunity supplies to businesses in other EU member states
  
• Supplies subject to the reverse charge procedure
  
• Export supplies to countries outside the EU
  

Legal basis for VAT exemption

Sections 19, 4, and 6a of the UStG provide the relevant legal framework for potential VAT exemptions in Germany.

Application of the small-scale entrepreneur rule according to Section 19 of the UStG

According to Section 19 of the UStG, businesses qualify for the small-scale entrepreneur rule if their total revenue in the previous year was less than €25,000 and is not expected to exceed €100,000 in the current financial year. Small-scale entrepreneurs are exempt from charging VAT. This means that they can issue invoices without VAT. Since tax rates and tax amounts are not included, the invoice amount is listed as the final total. However, these invoices must contain a corresponding note that states clearly that the issuer is exempt from charging VAT.

Under this simplification rule, small-scale entrepreneurs are generally not required to file preliminary VAT returns or annual VAT returns with the tax office. Exemptions apply only to intracommunity purchases and transactions subject to the reverse charge procedure. Small-scale entrepreneurs cannot claim an input tax deduction, so any VAT paid remains a final cost for the business.

Tax-exempt transactions under Section 4 of the UStG

Section 4 of the UStG contains a detailed list of transactions. These include, among others, medical treatments, certain educational services, insurance and financial transactions, and other legally defined activities. Although these services are generally subject to tax, the VAT Act provides for their exemption.

In practice, this means that no VAT is shown on the corresponding invoices. At the same time, the companies issuing the invoices must include a reference to the specific tax exemption under Section 4 of the UStG.

Intracommunity supplies under Section 6a of the UStG

According to Section 6a of the UStG, supplies of goods from Germany to other EU member states might qualify as tax-free intracommunity supplies, provided that the recipient is a business with a valid VAT identification number issued by another EU member state. In addition, proof must be provided that the goods were transported to the other member state.

What are the rules for invoicing within Germany, within the EU, and to third countries?

How VAT is treated on invoices depends primarily on the country in which goods or services are being supplied. The decisive factor is whether the transaction is purely domestic (within Germany), takes place within the EU, or involves an entity in a third country. Different legal mechanisms for taxation or tax exemption apply in each case.

The focus is on the various tax bases for VAT: the German market as the standard tax jurisdiction, the EU single market with its specific documentation and identification requirements, and the international trade in goods and services with third countries. The place of supply determines whether VAT is reported, whether it’s omitted, or whether it’s transferred to another taxable party.

Invoicing within Germany

Within Germany, supplies of goods and services are generally subject to VAT under the German VAT Act. In these cases, VAT is usually indicated on an invoice and is remitted by the supplier, unless national exemptions apply, such as the small-scale entrepreneur rule under Section 19 of the UStG or tax exemptions provided for under Section 4 of the UStG. In these cases, VAT is not shown on the invoice, even though the place of supply is in Germany.

According to Section 14 of the UStG, a compliant invoice issued within Germany must contain the following mandatory information:

• Full name and address of the company supplying the goods or service
  
• Full name and address of the recipient of the product or service
  
• Issue date of the invoice
  
• Date of delivery or other supply (i.e., the performance period)
  
• Tax number issued to the supplying company by the tax office or the VAT identification number (VAT ID) issued by the Federal Central Tax Office
  
• Sequential, unique invoice number
  
• Quantity and type of products supplied or the scope and type of service rendered
  
• Price (net) and total; in the case of tax exemptions, the invoice total corresponds to the final total without VAT
  
• Applicable tax rate and corresponding tax amount, or—in the case of tax exemptions or application of the small-scale entrepreneur rule—a corresponding note indicating that the supply is exempt from VAT or that VAT is not due
  

Invoicing within the EU

Invoices for tax-exempt intracommunity supplies to other EU countries must contain both the mandatory information stipulated by Section 14 of the UStG and, additionally, the VAT ID number of the recipient and a note indicating that this is an intracommunity supply. Evidence that the goods have been transported to the destination country does not have to be provided on the invoice itself. German businesses are not required to show VAT on their invoices if the requirements for intracommunity supply are met. Taxation generally takes place in the recipient’s country of destination.

When a German business supplies services to a business in another EU member state, this generally qualifies as a supply of intracommunity services. In such cases, the place of supply shifts to the recipient’s country according to Section 3a of the UStG. VAT is charged there under the reverse charge procedure. This means that German businesses can issue an invoice excluding VAT. However, the invoice must contain a corresponding note indicating that VAT is the responsibility of the recipient.

Supplies of goods or services to private individuals within the EU, on the other hand, are subject to the rules on domestic sales. Businesses in Germany must show German VAT on their invoices, unless special exemptions apply. Businesses conducting cross-border distance sales of goods should pay particularly close attention to the EU-wide €10,000 threshold. Generally speaking, VAT is due in the country of destination if sales exceed this threshold. This tax is typically remitted using the One Stop Shop (OSS).

Invoicing to third countries

Different VAT rules apply to business conducted with entities that are located in third countries rather than the EU single market. Each country has its own regulations that German businesses must observe. Depending on the specific third country, the reverse charge procedure or other local requirements could apply. In some countries, German businesses are required to register for tax purposes or to appoint a tax representative to fulfill the local requirements for them. A thorough review of country-specific regulations is therefore necessary.

Under certain conditions, supplies of goods from Germany to third countries can be treated as tax-exempt exports according to Section 4a of the UStG in conjunction with Section 6 of the UStG. The prerequisite is that the goods do in fact leave the German or EU customs territory, and that this is documented through appropriate export documentation. If the export can be proven, the invoice must not show any German VAT. Additionally, German companies must include a note on the invoice indicating the tax-exempt status.

VAT is due on cross-border B2B services according to the place of supply. If the place of supply is in a third country—either at the recipient’s registered office or at their place of business—the supply is not subject to German VAT. In this case, German VAT is not shown on the invoice; however, it’s advisable to add a note such as “Not subject to tax pursuant to Section 3a, Paragraph 2 of the UStG.” If the third country uses the reverse charge procedure, this should be noted on the invoice.

In what cases does the liability for VAT shift to the recipient?

In principle, the supplier of goods or services is liable for VAT and remits it to the tax office. In certain cases, however, VAT law stipulates that the liability for VAT shifts to the recipient. This is known as the reverse charge procedure. Under this procedure, the supplier issues an invoice excluding VAT, while the recipient calculates and remits VAT to the appropriate tax authority.

The reverse charge procedure is intended to simplify cross-border transactions and prevent tax fraud. Application of the procedure requires that the statutory requirements for a shifting of the VAT liability are met. In such cases, the invoice must include a corresponding note.

Key applications of the reverse-charge procedure include:

• Intracommunity supply of services to businesses within the EU, provided the place of supply is in the EU member state of the recipient
  
• Certain B2B services with a place of supply in a third country, provided that the country in question applies the reverse charge procedure and the place of supply is in that country
  
• Construction services invoiced between businesses in the construction industry pursuant to Section 13b of the UStG
  
• Supplies of certain metals, scrap metals, and waste materials for which the UStG stipulates that the VAT liability shifts to the recipient
  
• Supplies of mobile phones, integrated circuits, and certain electronic products exceeding legally established value thresholds
  
• Building cleaning services invoiced between businesses engaged in corresponding activities
  
• Certain supplies of land and real estate, provided the requirements of Section 13b of the UStG are met
  
• Supply of gas, electricity, heat, or cooling in specific, legally regulated circumstances
  

Prior to invoicing, businesses in Germany should verify whether they actually meet the requirements to apply the reverse charge procedure. Mistakes involving VAT can have tax consequences for both the issuer of the invoice and the recipient of the service.

Mandatory note for invoices without VAT

Below is an overview of the key phrases you should include as a note on your invoices, depending on the specific case:

• Small-scale entrepreneur rule: “No VAT due in accordance with Section 19 of the UStG”
  
• Tax-exempt transactions according to Section 4 of the UStG: Include a reference to the applicable tax exemption under Section 4 of the UStG
  
• Tax-exempt intracommunity supply: “Tax-exempt intracommunity supply pursuant to Section 4, No. 1b in conjunction with Section 6a of the UStG”
  
• Tax-exempt export supply to a third country: “Tax-exempt export supply pursuant to Section 4, No. 1a in conjunction with Section 6 of the UStG”
  
• B2B service with place of supply in a third country: “Not subject to tax, pursuant to Section 3a, Paragraph 2 of the UStG”
  
• Reverse charge procedure: “The service recipient is liable for any tax”
  

Common causes of additional tax assessments

Demands for additional tax payments often arise because formal or substantive VAT requirements have not been correctly implemented. Invoices that don’t show VAT are particularly prone to error.

Additional tax assessments often result from incomplete or missing invoice information, including mandatory details such as invoice number, performance period, and the customer’s tax number or VAT ID number. Invoices are also regularly flagged for not containing a corresponding note on tax exemptions or the reverse charge procedure. Additionally, it’s always important to determine the place of supply correctly.

Other common causes of additional tax assessments involve the incorrect application of VAT exemptions. Examples include:

• Incorrectly applying the small-scale entrepreneur rule
  
• Miscategorizing an intracommunity supply
  
• Failing to observe delivery thresholds for private customers in the EU
  
• Failing to properly document export supplies to third countries
  

How Stripe Tax can help you comply with VAT regulations

Stripe Tax helps businesses in Germany calculate the correct amount of VAT when invoicing, minimizing errors and simplifying processing—whether you’re invoicing an entity in Germany, another EU country, or a third country. Stripe Tax ensures that all mandatory information is included, automatically calculates the correct tax amounts, and adds the necessary notes on tax exemptions or the reverse charge procedure. This means your invoices are always compliant with the statutory regulations, even when your transaction volume rises or your international business expands.

In addition, by automatically capturing and processing tax data, Tax makes it easier to prepare preliminary VAT returns and annual VAT returns. This allows you to minimize the risk of incorrect invoices, additional tax assessments, or inquiries from the tax authorities.

FAQs about invoices excluding VAT

Below, you’ll find answers to key questions about invoices without VAT in Germany.