Immediately following the basic controllability of a transaction, it is necessary to check its VAT liability. Only if a turnover does not fall under any of the tax exemptions under Section 4 of the UStG is it subject to sales tax at all. So let’s take a look at the most important tax exemptions in VAT law and possible exceptions to the respective basic cases!
According to § 1 (1) no. 1 UStG, all deliveries and other services are subject to VAT if they are carried out by an entrepreneur in Germany. If these conditions are common, the turnover is taxable. It therefore basically falls within the scope of the German Sales Tax Act, which gives the Federal Republic of Germany a right to tax.
Whether the taxable turnover is actually taxable is governed by §§ 4 to 4b UStG (tax exemptions). If such a tax exemption applies, the German legislature does not exercise its taxation right. The background is usually regulations of the VAT system directive, through which a turnover is tax-free in Germany, for example, but taxable in the other member state.
The most important tax exemptions in the exam and consulting practice, finally listed in § 4 UStG, are:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.