As a self-employed person, you may make purchases outside of Germany but within the EU. In such cases, VAT can be handled in different ways. In this article, we explain how it works and how you can claim back the VAT you’ve paid.
Reverse Charge Explained
In intra-community transactions within the EU, such as when a German business purchases goods or services from a company based in another EU country, the so-called reverse charge mechanism is often applied. In this case, the VAT liability is reversed: the seller does not charge VAT. Instead, the buyer must calculate the VAT applicable in their own country and declare it in their VAT return.
What this means for you: If you purchase goods or services from a company in another EU member state and provide your VAT identification number (VAT ID), you will generally receive an invoice without VAT - i.e. with a VAT rate of 0%. You are then required to calculate the applicable German VAT on the amount and report it in your VAT return.
The good news: If you are entitled to deduct input VAT, you can claim the calculated VAT as input tax at the same time. As a result, there is no actual payment obligation. Although the process may sound a bit complicated at first, it is usually a bookkeeping zero-sum transaction. The goal is to ensure that VAT is paid in the country where the consumption takes place, your country, while also simplifying trade within the EU.
Reverse Charge for VAT-Registered Self-Employed
If you are subject to the regular VAT scheme (meaning you charge VAT on your invoices), you should always provide your own VAT ID when making business purchases within the EU. The foreign supplier will then issue the invoice without charging VAT, and will include a note indicating that the reverse charge applies (e.g. "VAT liability of the recipient").
Tip:
Always include your VAT ID when ordering goods or services from other EU countries. That way, you avoid being charged foreign VAT, which cannot be reclaimed through your German VAT return.
Reverse Charge for Small Business Owners (Kleinunternehmer)
As a small business owner under the Kleinunternehmerregelung, you’re exempt from charging VAT - but this also means you cannot deduct input VAT. So you need to be particularly careful when buying from other EU countries.
While you can request a VAT ID as a small business owner, it’s generally not recommended for EU purchases. Why? Because if you use your VAT ID, the reverse charge procedure will apply, and you’ll be required to pay German VAT on the net amount, even though you’re not entitled to deduct it. That VAT becomes an actual cost for you.
If you do not provide your VAT ID, the foreign supplier will treat you like a private consumer and charge local VAT on the invoice. You simply pay the gross amount, and the matter is settled. Although this foreign VAT cannot be reclaimed either, you at least avoid the hassle of dealing with German tax obligations.
In short: As a small business owner, it’s usually best to make EU purchases without using your VAT ID. You’ll get standard gross invoices and avoid reverse charge obligations altogether.
Invoices with Foreign VAT: What Should You Do?
In practice, it’s common for self-employed professionals to receive invoices that include foreign VAT - especially for travel expenses like hotel bills, restaurant receipts, rental cars, or trade show tickets in other EU countries. It can also happen if you forget to provide your VAT ID during the booking or order process.
Important to know:
You cannot deduct foreign VAT through your German VAT return.
For your bookkeeping: Record such expenses at the gross amount. The full invoice total, including foreign VAT, counts as a business expense, but you won’t get an input VAT refund. So as a VAT-registered business, you lose money when you pay foreign VAT, since it cannot be refunded via the German tax system. As a small business owner, you’re used to this anyway, as you book all your expenses as gross amounts.
VAT Refund Procedure: How to Get Foreign VAT Back
Thankfully, if you’re VAT-registered, you don’t necessarily have to write off foreign VAT as a cost. You can apply for a VAT refund using the VAT refund procedure (Vorsteuervergütungsverfahren).
For EU countries, this process is relatively simple and handled via an online application at the German Federal Central Tax Office (BZSt). You upload your foreign invoices and submit a refund request.
Important conditions:
You must be entitled to input VAT deduction in Germany (i.e. not a small business owner),
And you must not have been VAT-registered in the other EU country during the refund period.
The deadline is typically September 30 of the following year.
This process is worthwhile if you’ve accumulated larger amounts of foreign VAT -e.g. from high trade fair fees or frequent hotel stays abroad. For smaller amounts, the administrative effort may not be worth it.
For VAT paid outside the EU (e.g. on business trips to non-EU countries), refunds may also be possible - but the rules vary by country and often require applications to be submitted directly to the foreign tax authority.
Important: Small business owners cannot participate in the VAT refund procedure, as they are not entitled to input VAT deduction. This means foreign VAT is always part of your business expenses and cannot be refunded.
If you have questions, feel free to reach out to one of our tax coaches via chat or email us at support@accountable.eu.