VAT (value added tax)

Mehrwertsteuer (VAT, officially: Umsatzsteuer) is a consumption tax on almost all goods and services in Germany – you pay it with every purchase.

The tax rates:

• Standard rate: 19% (on most goods and services)
• Reduced rate: 7% (staple foods, books, local public transport, cultural events, medical aids)

Curious 7% rules:

• A burger in a restaurant: 19%. A burger to take away: 7%
• Tap water: 7%. Mineral water: 19% (that was the case until 2025, reform planned)
• Baby clothes: 19%. Pet food: 7%
• Hotel night: 7%. Breakfast at the hotel: 19%

For consumers:

• You pay VAT on EVERY purchase (it's included in the price)
• Consumer prices are ALWAYS gross prices (incl. VAT)
• VAT is the largest single tax: over 290 billion euros in revenue/year

For the self-employed:

• You MUST add VAT to your invoices
• Input tax deduction: you get back the VAT you pay yourself
• Small business rule: up to €22,000 turnover you can opt out of charging VAT