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Software Sales Tax in Germany 🌶🌶 🇩🇪

How do I solve my tax liability?
Agony Rating
Sales Tax Rate
Taxable Goods
Highest Penalty

How likely am I to get caught for owing sales tax in Germany?

Very likely, if you’re a B2C business.

What is the sales tax threshold in Germany?

Based outside of Germany: €0, you’re liable as soon as you sell to customers in Germany. Based in Germany: Sales exceeding €17,500 a year.

Is SaaS taxable in Germany?

Yes. You owe tax for the sale of cloud software subscriptions to customers in Germany.

Are software downloads taxable in Germany?

Yes. You owe tax for the sale of software downloads to customers in Germany.

Are eBooks taxable in Germany?

Yes. You owe tax for the sale of eBooks to customers in Germany.

Are digital downloads taxable in Germany?

Yes. You owe tax for the sale of digital downloads to customers in Germany.

Registering for VAT in Germany

😐🌶️ It's not that complicated

If your business has a physical presence in Germany, you only need to register for sales tax if your sales exceed €17,500 a year. If you sell software to customers in Germany but your business is based elsewhere, you’ll need to register for VAT right away. 

If you sell into more countries across the EU, and your sales exceed €10,000 a year, you can register for the VAT MOSS system, which allows you to then file and remit your sales taxes for multiple EU member states in one transaction.

Filing & Remittance of VAT in Germany

😐🌶️ It's not that complicated

Filing frequency: Quarterly

Like filings for other countries in the EU, the process in Germany is pretty straightforward.

However, if you serve business customers in Germany and other EU member states under the VAT MOSS system, it does come with quite a bit of admin. 

In this instance, you’ll need to complete a separate filing called the EC Sales List. This is so you can document and report all of your sales to VAT-registered customers in one go.

Penalties for VAT non-compliance in Germany

😬🌶️🌶️ It's very high / punitive

Tax penalties in Germany are on the high side, both for mistakes made in error and for those found to be deliberately avoiding tax responsibilities.  

The higher your sales in Germany, the greater the fines. For example, the cap on the fine increases for those with sales exceeding €100,000, and then again for those above €1m. Germany also places heavy responsibility on individuals to declare any sales tax issues to the authorities up to ten years after the event. 

If you sell to additional countries in the EU, under the VAT MOSS system, you can be excluded if you’re late with or fail to submit your returns for three consecutive quarters. This would mean you then have to register, file and remit your sales taxes in each individual member state.

Had enough yet? There's more…

How to become sales tax compliant globally 🗺

Three Routes to Compliance for SaaS Executives

SaaS executives have a choice of three routes to global tax compliance. Get the guide to walk through the options for your team.

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Don't Worry, Ask Hugo

As CFO of Paddle, Hugo's finance team manages global tax compliance for $100M's of ARR from over 2,000 software businesses. Ask your questions in our live webinar.

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How can Paddle help?

Paddle can take all your responsibility & liability for sales tax off-your hands. Our global entities, finance team, and $160k+ year spend on agents, tooling, and accountants is ready for you.

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