How does it work?

Who is entitled to VAT refund in Germany?

Refundable Expenses

These are the basics:

Enterprises with legal seat in a foreign country (EU territory or non-EU member state) are entitled to VAT recovery through a VAT refund claim.

There are two conditions that have to be met to finish the VAT refund procedure in Germany successfully:

  1. The supply of goods or services must be taxable from a VAT law perspective in Germany.

    Example: A German lawyer charges German VAT to a company outside Germany for his services.

    The service is not taxable in Germany (outside the scope of German VAT).

    As a consequence the German VAT can not be recovered through a VAT refund claim from the German Federal Tax Office!
  2. The company has received an original invoice from the supplier which fulfills the invoicing requirements of the respective country (i.e. according to § 14 Sect. 4 of the German VAT Law).
An enterprise with legal seat outside the EU territory (e.g. USA, Switzerland, Japan, Korea) can only recover prepaid VAT in Germany, if the country in which the enterprise has its legal seat does not levy value added tax or a similar tax, or, in case such tax is levied, if such tax is refunded to enterprises with legal seat in Germany (reciprocity).

The legal basis for the refund of prepaid European VAT is results from the 8th Directive (79/1072/EWG) for companies based in Europe and the 13th Directive as of November 17, 1986 (86/560/EWG) for companies outside the EU territory. In Germany, these Directives have been implemented in § 18 section 9 of the German VAT Code (UStG) and in §§ 59 to 62 of the German VAT Implementation Regulation (UStDV).