If you’re importing goods into Germany, you’ll need to be aware of both customs duties and import sales tax (import VAT). In this article you will find out what import value-added tax (VAT) is, who has to pay it, and how it differs from customs duty. We’ll also cover how to calculate import VAT, when it can be refunded, and the relevant tax regulations.

What’s in this article?

• What is import VAT?
  
• Who has to pay import VAT?
  
• What regulations apply to import VAT?
  
• When can import VAT be refunded?
  
• What’s the difference between import VAT and customs duty?
  

What is import VAT?

Import VAT (or EU import VAT) is a tax applied to goods brought into the European domestic market from a “third country,” which is a country that does not belong to the EU or the European customs territory. Therefore, no import VAT is payable within the EU. Import VAT, often called “import tax,” is designed to make sure that imported goods are taxed in the same way as goods produced and sold within the country.

Import VAT is broadly the same as regular VAT, which is charged on the consumption or sale of goods and services in Germany or for deliveries within the EU. For example, when goods are brought into Germany from a non-EU country, an import VAT is due—as specified in Section 1, Paragraph 1, Number 4 of the VAT Act. Unlike regular VAT, import VAT is classified as an import tax under customs regulations, in addition to being considered a consumption tax. Regular VAT is collected by the tax office, whereas import VAT is imposed by the German customs agency.

Import VAT is calculated using the VAT rate of the destination country, and the goods are considered VAT-exempt from the viewpoint of the non-EU country. The VAT rates in Germany are 19%,7%, or 0%. You can find the VAT rates, and therefore the import VAT rates, for EU countries in the table below. Import VAT is applied to the net price of goods or services. For businesses, import VAT can usually be deducted as input tax according to Section 15, Paragraph 1, Sentence 1, Number 2 of the VAT Act. In 2022, Germany collected approximately €86.6 billion in import VAT revenue.

List of (import) VAT rates in EU countries

Source: EU’s Your Europe

Who has to pay import VAT?

EU VAT must always be paid when goods are imported into the EU from non-EU countries. As a result, both businesses and individuals in Germany must pay import VAT.

However, there is a difference between purchases made locally and those ordered by mail. If you buy goods in non-EU countries and bring them into Germany in your luggage, you must pay import VAT if the value of the goods exceeds €430, but this only applies when traveling by plane or ship. If you enter Germany by train or car, the maximum value of goods you can bring tax-free is €300. For individuals under 15 years of age, the tax-free limit is €175, no matter how they travel.

There is no allowance for online orders from non-EU countries. EU VAT is always charged on these purchases, no matter their value. Until June 30, 2021, there was an exemption limit of €22, but the exemption was removed to prevent tax fraud.

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Where do I have to pay import sales tax?

Import sales tax must be paid in the country where the purchased goods are brought in. Payment is made to the customs authority of the country where the goods are imported.

What regulations apply to import VAT?

Import VAT in Germany and the EU is controlled by several laws and regulations. These include the German VAT Act and the EU Customs Code.

The VAT Act sets the basic rules for value-added tax, including import VAT. The key texts for VAT are:

• Section 1, Paragraph 1, Number 4 of the VAT Act - Taxable domestic transactions: Import VAT is the tax applied to imported goods from third countries into Germany.
  
• Section 2 of the VAT Act - Entrepreneur status: Who qualifies as an entrepreneur under the VAT Act and is therefore required to pay import VAT.
  
• Section 3, Paragraph 8 of the VAT Act - Import of goods: Importing goods from non-EU countries is subject to tax.
  
• Section 10 of the VAT Act - Assessment basis for VAT: How the assessment basis for import VAT is calculated.
  
• Section 21 of the VAT Act: Special provisions for EU VAT.
  

When can import VAT be refunded?

Paid import VAT can be reclaimed as input tax through declarations in advance or an annual VAT return. However, this only applies to business expenses. Therefore, only businesses or individuals who are actively engaged in entrepreneurial activities and subject to VAT can qualify for a refund. Private individuals in Germany cannot get a refund for import VAT, just as they cannot reclaim VAT on domestic purchases. This also applies to businesses that make use of the small-scale entrepreneur rule. They typically cannot deduct input VAT because they don’t apply VAT to their sales.

What’s the difference between import VAT and customs duty?

Import VAT and customs duties serve different purposes and are calculated differently. Import VAT aims to prevent imported goods from gaining tax benefits, whereas customs duties are primarily used to manage international trade, safeguard local industries, and generate revenue for the state.

Customs duties are not taxes; they’re charges on goods brought into the EU from non-EU countries. Each EU country sets its own customs duty rates based on EU customs law. The customs value of goods, which serves as the basis for assessment of import duties owed, varies based on the type of goods and their country of origin. The duty can either be a set amount per unit of goods or a percentage of the goods’ value. You can find detailed information on customs tariffs and import duties for all goods in the EU Customs Tariff database (called “TARIC”). Unlike customs duties, import VAT is based on the domestic VAT rates. However, the assessment basis for import VAT is also the customs value, which is the product’s value plus any transportation or shipping costs.

Below is a specific example of how to calculate the import costs for a vacuum cleaner with a built-in electric motor, a maximum power of 1,500 watts, and a maximum dust container capacity of 20 liters. The vacuum cleaner has a value of €200 and ships from the United States:

Calculating import VAT

Step 1: Calculate the customs value

Value of Goods + Shipping and Insurance Costs = Customs Value
€200 + €20 = €220

Step 2: Calculate the customs duty

Customs Value x Customs Rate = Customs Duty
€220 x 2.2% = €4.84

Step 3: Calculate the import VAT

Customs Value + Customs Duty = EU VAT Assessment Basis
€220 + €4.84 = €224.84

EU VAT Assessment Basis x Import VAT Rate = Import VAT
€224.84 x 19% = €42.72

Step 4: Calculate the total cost

Customs Value + Customs Duty + Import VAT = Total Cost
€220 + €4.84 + €42.72 = €267.56