Value Added Tax (VAT)
- VAT Overview
Germany imposes a Value-Added Tax (VAT) of either 19% or a reduced rate of 7% on most items/services purchased. This tax is similar to a sales tax in the U.S. but it is generally already added into the price. That means the sticker price already includes either the 19% or 7% VAT. The full rate of 19% is charged on most items/service. The reduced rate of 7% is charged on basic food staple items (milk, flour, eggs, etc), some magazines, books, hotel stays, etc. Some services and some used items may not include a tax that can be extracted.
Department of Defense personnel stationed in or TDY to Europe may be eligible to use the U.S. Forces Tax-Relief Program to avoid paying this tax for their personal purchases. In other words, you may be able to have the sticker price reduced by extracting the 19% or 7% VAT when making qualifying purchases through a U.S. Forces VAT Office.
International Agreements between the U.S. and Germany permit U.S. Forces to procure tax-free goods and services for eligible members. Please be aware that there are restrictions and that intentional or unintentional abuse of the program will lead to personal tax liabilities, expulsion from the program, Commander or Supervisor notification, and it may be considered punishable tax evasion.
Note: there exists NO direct entitlement to VAT relief of the individual member of the U.S. Forces! VAT relief only applies to procurements by a procurements agency of the U.S. Forces, here the VAT office. A contract shall not be concluded between the individual and the vendor as in such case VAT relief is not available.
- VAT Policies and Procedures
Knowing when, where, and how to utilize this program is important to stay out of trouble. The following are only examples and are non-conclusive. Examples of purchases where the sticker price may be reduced by extracting the 19% VAT:
- Vehicle purchases and repairs/maintenance/car parts
- Rental Cars
- Minor home repairs/renovations*
- Heating Oil
- Many grocery items (non-basic food staple items)
- Restaurant bills (to include breakfast in hotels)
Examples of purchases where the sticker price may be reduced by extracting the reduced 7% VAT:
- Basic grocery items (food staple items)
- Some magazines/books
- Hotel stays (extras such as breakfast are taxed at 19%)
The reduction of the sticker price occurs when an eligible U.S. Forces member presents the vendor with a valid VAT form when the order is being placed for an item or service. Processing tax-relief after an order was placed or commitment was made by the individual is not authorized.
The program is voluntary. German vendors are not required to accept VAT forms; they can opt to decline and charge the VAT. In such a case you may want to seek a different vendor.
Please note that the program makes use of 2 different VAT forms. The NF1 VAT form is for purchases of up to 2,499.99 Euros (not including VAT), of the NF2 VAT form is for purchases of 2,500 Euros or higher (not including VAT). Both forms look almost alike but the procedures to obtain them are different. Both VAT forms are available at any VAT Office in Germany for eligible US Forces members .
In order to participate in the program, a U.S. Forces member (sponsor) must establish an account at a VAT office by filling out a registration form. Bonafide members of the household may be added to the sponsor's account to also be able to make VAT exempt purchases.
VAT Offices are authorized to issue up to 10 VAT forms for purchases up to 2,499.99 Euros (not including VAT) and one VAT form at a time for purchases of 2,500 Euros or higher (not including VAT) per household.
Most Common Mistakes
A. Going Along with What Vendor States
Vendors want to conclude sales to make money. Generally,vendors are not familiar with the restrictions of the program. A number of times, vendors have told U.S. Forces members that a procedure or a transaction was authorized using the VAT forms. In reality, the vendor was acting on a lack of knowledge and the transaction ended up not being a proper tax-relief transaction. As a result the U.S. Forces member had to pay the taxes afterwards. We have seen this happening with regard to multiple transactions within a period exceeding one month (see below – only receipts within one month can be combined), claims that VAT forms can be used for cellular contracts or utilities (see below – not permitted), etc. You must observe the rules published by the U.S. Forces, rather than listening to vendor claims.
B. Collecting Receipts
Combining multiple transactions on one VAT form over a period exceeding one month is not authorized and will result in a tax debt (tax will be due). Also, the VAT form must be valid (dates) for all receipts of the combined transaction and the transaction must be finalized NLT then the last day of the one month period.
C. Wrong Amounts/Wrong form
Using an NF1 VAT form for a purchase of 2,500 Euros or higher is simply not authorized. Any purchase of 2,500 Euros or higher must be done using the NF2 procedure, which requires providing a cost estimate, cost proposal, or proforma invoice to the VAT Office before the purchase is made. If the incorrect procedure/form was used, VAT relief will not be granted and you will have to go back to the vendor to pay the taxes. In addition, you will receive a violation notice.
D. Home Renovation/Repair
Purchases up to 2,499.99 Euros (not including VAT) are not reviewed until the used VAT form is returned to the VAT Office. If the VAT Office detects unauthorized repairs, VAT relief will not be granted and a violation notice will be sent to the U.S. Forces member. In such a case the U.S. Forces member will have to go back to the vendor and pay the tax. Purchase of garden sheds, green houses, car ports, windows, tiles, and a number of other items/services related to home repair/renovation are not permitted.
E. Heating Oil
Determining how much heating oil is needed to fill a tank can be difficult. Once the truck starts pumping oil into your tank, the value of the oil may go beyond the 2,499.99 limit for an NF1 form. An NF2 VAT form may, however, only be issued based on a cost estimate, prior to placing an order. That means, if the value pumped into your tank exceeds 2,499.99 Euros you will have to pay the taxes. To avoid this, you should ask the oil vendor for the per liter price (not including VAT) to calculate how many liters you can order/buy to stay within the boundaries for the NF1 VAT form. Make sure to leave a buffer for any delivery charges. A safe calculation is to only order 2,300 Euros worth of oil leaving you a 199.99 Euros buffer for any potential delivery charges.
F. Order forms/Order Confirmations/Contracts/Bills of Sale – After-the-Fact Transaction
Sometimes U.S. Forces members come to VAT Offices requesting VAT forms for purchases of over 2,500 Euros and present an order form, order confirmation, contract, or bill of sale. However, if the sale has taken place already because the U.S. Forces member concluded a contract with the vendor, we are not authorized to issue VAT forms any longer. Ownership may not have been transferred and payment may not yet have been made but the documents mentioned are legal documents concluding the legal transaction. Our U.S. Forces members do not have the authority to enter into a sales transaction without having a VAT form (purchase authorization) in their hands. In other words, if you don’t have a VAT form, do not commit or sign any documents just yet. Obtain the VAT form first, only then you are authorized to make the purchase.
G. Utilities and Other Long-Term Contracts
VAT forms may not be used for any type of long-term contract such as utilities (electricity, water, natural gas, propane gas, cellular contracts, vehicle leases etc.) that exceed one month in duration. Even though you may be receiving monthly bills, the contracts many times stipulate a long-term relationship (more than one month). There have been instances where utility or cellular providers have asked to be provided with VAT forms so they could bill without taxes. If you comply with such a request, you are violating tax-relief rules, VAT relief does not apply, and you will receive a violation notice. The U.S. Forces offer a separate Utilities Tax Avoidance Program (UTAP) you may sign up for.
H. Group Purchases
Group purchases are authorized when a group of eligible people (e.g. unit, wives club, etc.) wants to make a joint purchase (e.g. jointly used item, joint event or joint trip). The group as such does not hold status under the NATO-SOFA Supplementary Agreement – a VAT form cannot be issued in the group’s name. For a valid group purchase, one person must act as the organizer and obtain a VAT form in his or her name. An example would be a unit Christmas party. Provided all participants are eligible personnel, a VAT form in an individual’s name may be used for the entire event. A common mistake is that a unit signs the catering contract in November to lock-in the room/catering etc. but does not have the money collected yet to obtain the required cashier’s check and the VAT form until sometime towards the middle of December. Since the contract was signed (in November) without having obtained a VAT form beforehand, the transaction constitutes an invalid after-the-fact transaction and taxes are due. A VAT Office is not authorized to issue a VAT form for an after-the-fact transaction. The VAT form must be issued prior to signing any contracts.
*Minor repairs are typical move-in/move-out expenses and/or expenses that are typically the tenant’s responsibility, regardless of whether the U.S. Forces member owns or rents the dwelling. Expenses in connection with repair or maintenance of the basic structural of a dwelling are NOT considered minor repairs. Army in Europe Regulation AER 215-6 provides more information (especially Sections 12 through 43).
- Important Notes
VAT forms are controlled tax documents – not following the rules will void the tax-free status of a transaction (tax will have to be paid) and may result in loss of tax relief for the entire household and notification of your commander or supervisor.
- Vendors are generally not familiar with all the intricate tax-relief rules – a transaction may not be authorized, even though a vendor states that a transaction is valid!
- Repetitive purchases from the same vendor may be combined on one VAT form only if the transactions occur within one month, the total amount does not exceed 2,499.99 Euros, and all purchases are processed NLT the last day of that month
- The purchase or ordering must take place within the “Valid From:” and “Valid Until:” date range indicated in box 3
- The purchase may not exceed the amounts indicated on the VAT forms (NF1 up to 2,499.99 Euros, NF2 will indicate the exact purchase price)
- You must have a valid VAT form with you when placing an order or otherwise committing to a purchase. Obtaining and providing a VAT form after order placement is not permitted (e.g. when the delivery takes place or when payment is made)
- You may NOT split one purchase into several transactions by using multiple VAT forms to avoid the 2,500 Euros threshold (e.g. a couch costing 3,000 Euros may not be bought using two NF1 VAT forms by writing 2,000 Euros on one VAT form and 1,000 Euros on a second VAT form)
- You may NOT use the VAT form for a tax-free purchase for ineligible personnel
- You may NOT use VAT forms for revenue generating activities (e.g. home-based business, business as an independent contractor, buying and fixing cars for re-sale, etc.)
- You may NOT use VAT forms for buying new or used vehicles for registration in the German vehicle registration system (tax-free vehicles must be registered with USAREUR)
- You may NOT use VAT forms for any expenses related to the purchase or sale of real estate
- You may NOT use VAT forms for renovation/repair of real estate of 2,500 Euros or higher without prior IMCOM-Europe approval
- You may NOT use VAT forms for renovation/repair of real estate up to 2,499.99, unless it is considered a minor repair
- You may NOT use VAT forms for any long-term contracts (utilities, cellular contracts, vehicle leases, etc.)
- You may NOT use VAT forms for other purchases that are prohibited by AER 215-6
- You may NOT return VAT forms with false or incomplete data
- VAT Form Pricing
NF-1 VAT forms (up to 2,499.99 Euros)
Cost per form $5.00
Discount available only for new arrivals and first time only; $40 for 10 forms.
NF-2 VAT forms (from 2,500.00 Euros and up)
Cost per form $65.00
Cost UTAP Registration Fee $99
This fee is due upon each move or change in utilities provider.
*These prices were effective August 01, 2014
- Important Information and Forms for Purchases
- Appropriate Procedures for Collecting Receipts
A reminder that in accordance with Army in Europe Regulation 215-6, which outlines policies and procedures for tax-free purchases in Germany, customers should be advised of the appropriate procedures for collecting receipts and receiving Value Added Tax (VAT) refunds on previous purchases.
Collecting multiple receipts from prior purchases in order to obtain VAT refunds is acceptable, provided that the customer follows the below two policies:
1. Receipts must be for the same calendar month (not a 30-day window) as the month the VAT refund is given AND 2. The VAT form used for the refund must have been purchased before, and be valid on, the date of the first purchase and associated product receipt.
Please adhere to the policies outlined by AER 215-6, not practices of the vendor, to ensure you, and other Americans living in Germany under SOFA status, retain tax-free purchase privileges.
A customer purchases a VAT form on Oct. 2. He purchases groceries on Nov. 9, 14 and 22. He brings the three receipts from Nov. 9, 14 and 22 back to the store on Nov. 29, using the VAT form purchased on Oct. 2, and receives a tax refund. This is an acceptable refund.
Scenario 1: A customer purchases groceries on Nov. 9, 14 and 22. She purchases a VAT form on Nov. 15. She brings the three receipts from Nov. 9, 14 and 22 back to the store on Nov. 29, using the VAT form purchased on Nov. 15, and receives a tax refund.
***Only the purchases made on Nov. 22 are eligible for tax exemption using the VAT form purchased on Nov. 15. The VAT form used for tax redemption must have been purchased prior to the purchase of the items eligible for tax relief.
Scenario 2: A customer purchases a VAT form on Oct. 2. He purchases groceries on Nov. 9, 14 and 22. He brings the three receipts from Nov. 9, 14 and 22 back to the store on Dec. 2, using the VAT form purchased on Oct. 2, and receives a tax refund.
***None of the purchases are eligible for a refund on Dec. 2, as the VAT on collected receipts must have been returned on or before Nov. 30 in order for the VAT redemption to be within the same calendar month. The Nov. 9, 14 and 22 receipts must have been returned with a valid VAT form, purchased prior to Nov. 9, no later than Nov. 30.
AER 215-6 states:
14. AFTER-THE-FACT PURCHASES—VAT REFUNDS Processing a request for tax relief (submitting an unpriced or priced purchase order) after an individual has ordered, received, or paid (including partial downpayment) for an item or service is considered an “improper corrective action” and not authorized. There are no provisions for vendor refunds of VAT after a purchase has been ordered, invoiced, or billed by the vendor or paid for by the customer (including partial downpayment). The tax-relief process may be used only in direct conjunction with a purchase. The only exceptions are as follows:
a. Occupying hotel accommodations or obtaining a rental vehicle immediately on arrival in Germany. In such cases—
(1) Travel orders must be presented to the TRO to document and justify the “retroactive” request for tax relief.
(2) The individual concerned must obtain the appropriate VAT-relief forms within 7 days.
(Paragraphs 24 and 33 provide more information.)
b. Repetitive purchases (for example, groceries from the same vendor) only when the following conditions are met:
(1) The vendor agrees ahead of time to process tax relief.
(2) Purchases are consolidated for tax-relief purposes and processed before the end of each calendar month.
(3) Tax-relief documents (VAT-relief forms) used by the customer have been issued before or in conjunction with the earliest receipt or invoice.
(4) The total of the invoice and receipt consolidation does not exceed €2,499.99 (excluding VAT).
(5) All other provisions of this publication are complied with.
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