If you’re an expat living in Germany, you’ve likely come across the term MwSt or Mehrwertsteuer. What is MwSt in Germany?
What is MwSt in Germany?
MwSt (Mehrwertsteuer) is Germany’s version of Value Added Tax (VAT). It is a consumption tax added to goods and services at each stage of production and distribution. As an expat, you will encounter MwSt almost everywhere—from grocery shopping to dining out and even when paying for services like internet or phone contracts.
Understanding how MwSt works can help you better manage your finances, whether you’re a student, young professional, or simply new to the country. This guide will break down everything you need to know about MwSt in Germany, from rates to refunds, in a quick and easy-to-digest format.
Current VAT Rates in Germany
Germany has two primary MwSt rates:
- Standard Rate: 19% – Applied to most goods and services, such as electronics, clothing, cars, and professional services.
- Reduced Rate: 7% – Applied to essential items like food (excluding luxury foods), books, newspapers, public transportation, hotel stays, and cultural services like museum tickets.
For example, if you buy a laptop priced at €1,000, you’ll actually pay €1,190, including the 19% MwSt (€190).
Why Does MwSt Matter to Expats?
As an expat, understanding MwSt is crucial because it affects your everyday expenses. Whether you’re setting up your new home, buying groceries, or dining out, MwSt is always included in the price. Knowing which goods and services are taxed at the reduced rate can help you make smarter financial decisions.
How is MwSt Displayed?
In Germany, most prices displayed in stores and online already include MwSt. You’ll often see the label “inkl. MwSt”(including VAT) on price tags or invoices, ensuring there are no surprises at checkout.
Do Expats Need to Pay MwSt?
Yes, all consumers, including expats, pay MwSt on goods and services in Germany. However, if you’re working as a freelancer or running a business, there are specific MwSt rules you need to be aware of:
- Freelancers and Small Businesses: If your annual revenue is below €22,000, you may qualify for the Kleinunternehmerregelung (small business regulation), which exempts you from charging MwSt to your clients.
- Business Owners: If you run a business, like KUMMUNI in Berlin, you’ll need to charge MwSt to your customers and pay it to the tax authorities.
How to Claim a VAT Refund as an Expat
If you’re an expat who travels frequently or plans to leave Germany, you may be eligible for a MwSt refund on certain purchases. Here’s how:
- Shop at Participating Stores: Look for stores offering tax-free shopping for non-EU residents.
- Request a Tax-Free Form: At the point of purchase, ask for a tax-free form and have it stamped by the retailer.
- Get Your Form Stamped at Customs: When leaving the EU, present your purchases, receipts, and tax-free forms at the airport customs desk to receive a stamp.
- Claim Your Refund: Submit the stamped forms at a tax refund counter at the airport or through a refund service provider like Global Blue or Planet Tax Free.
Common MwSt Pitfalls to Avoid
- Not Checking the Invoice: Always ensure that MwSt is included in your invoices, especially for large purchases or services.
- Missing Refund Opportunities: If you’re eligible for a refund, don’t forget to collect and submit your documents before leaving Germany.
- Freelancers Forgetting MwSt Rules: If you’re freelancing, make sure you understand whether you need to charge MwSt to your clients to avoid penalties.
Useful Tips for Managing MwSt as an Expat
- Budget Wisely: Remember that most prices already include MwSt, but always double-check, especially when making big purchases.
- Keep All Receipts: This is especially important for business expenses, tax returns, or claiming refunds.
- Consult a Tax Advisor: Germany’s tax system can be complex. If you’re running a business or freelancing, a tax advisor can help you navigate MwSt efficiently.
Final Thoughts
Understanding MwSt is essential for managing your finances as an expat in Germany. Whether you’re a student shopping for textbooks or a young professional furnishing your apartment, being aware of the tax rates and refund options can save you both time and money. For more quick and practical tips on expat life in Germany, keep exploring our Quick Reads for Expats category.
And if you’re searching for accommodation with zero discrimination, strong community support, and competitive pricing, check out KUMMUNI—a trusted housing provider in Berlin offering student accommodation and private rooms starting at €639.
