Our tax advisors offer years of experience working in Germany and Ireland
Whether you are an Irish business looking to set up shop in Germany or a German business entering Ireland, our DEinternational team has a wealth of experience in advising businesses on both the German and Irish tax systems. We aim to support you from your first time registering for tax in the country in question and we hope to create long term business partnerships, providing our clients with monthly services handling their tax returns and offering consultations on all tax related queries.
When determining if a company is liable to pay tax, it is important to determine whether the business has a permanent establishment in the country concerned. The Irish Double Taxation Agreements outline when a site constitutes a permanent establishment. These agreements can be found under the following link. In the case of Ireland and Germany, the Double Taxation Agreement between the two countries states that 12 months continuous activity in the host state creates a permanent establishment.
- Consultancy on the double taxation agreement
- Consultancy on the corporation tax rate, start-up exemption, capital allowance, intellectual property, research and development
- Company formation and registration for corporation tax
- Corporation tax returns filing
- VAT registration, filing VAT returns and consultation on the place of supply rules in Germany
- Construction withholding tax exemption and refund
- Tax registration for all relevant taxes and filing of tax returns
Below you can find detailed descriptions of DEinternational’s consultation and tax advisory services:
Services for Irish companies working in the German Market:
We assist Irish companies working in the German market, we can complete your registration for tax in Germany and we handle all your relevant tax returns. We focus especially on VAT and the German Construction Withholding Tax (Bauabzugsteuer).
The standard rate for VAT in Germany is 19% (Currently a reduced standard rate of 16% applies due to the COVID-19 pandemic). There is also a reduced rate of 7% (currently lowered to 5%) for goods and services like hospitality and cafés. Companies may be liable to register for VAT in Germany or to pay VAT on expenses, depending on the services offered. In the latter case, the company can apply for a refund. You may also be able to claim expenses that you do not get back in Ireland such as fuel, meals, car rental and hotel accommodation.
Our services for VAT in Germany include registration, filing returns and applying for refunds. Our VAT refund service is offered at comparatively low fees. We charge a basic fee of €150 and a success fee of 10%. In cases where no refund is obtained, you will not incur any costs.
Distance Sales to Germany and other EU countries (B2C)
A registration for VAT in Germany needs to be made for Irish companies whose sales of goods to private customers living in Germany exceeds the annual threshold of €100,000. For sales less than €100,000 per year the company has the option to register for VAT in Germany. If the sales go to other EU Member States the limit is usually €35,000 per year.
Telecommunications, Broadcasting and Electronic services (B2C)
VAT also needs to be deducted if electronic services are offered to private customers living in Germany or other EU Member States. The rates are based on the ones applying in the respective Member State.
To make this process easier for the suppliers it is possible to use a “Mini One Stop Shop” (MOSS). For this procedure, the company needs to register in one Member State (“Member State of Identification”) and then files all returns regarding telecommunications, broadcasting and electronic services in EU countries together with the VAT due.
Construction Withholding Tax
There is also a construction withholding tax in Germany. The rate is 15% and it might apply on payments to subcontractors. It is possible to apply for an exemption from this deduction.
Irish Taxation offers advice on Construction Withholding Taxes in Germany as well as registering for taxes, filing returns and applying for the exemption from the construction withholding tax.
Even VAT paid in other countries can be refunded with the assistance of DEinternational, as we are part of a global network.
The EU is updating the rules for VAT on online trade from the 1st of July 2021.
Specifically, the rules regarding VAT on cross-border business-to-consumer (B2C) e-commerce are being adapted to create a simpler system. The changes will affect all involved in online commerce, within and across EU borders, from commercial platforms to couriers, to customs operators, and consumers.
The main changes include the following:
- Introduction of the One Stop Shop (OSS)
- Online sellers and marketplaces can now register in one EU Member State to be valid for VAT payments on transactions for distance sales across the entire EU. This will reduce administrative requirements by 95% for those who register.
- EU Wide VAT Threshold
- The current individual thresholds for distance sales of goods within the EU are replaced by a general EU threshold of €10,000. Below this threshold, telecommunications, broadcasting and electronic services, as well as distance sales of goods will retain the VAT rates of the EU state in which the supplier is established.
- Removal of VAT Exemption for Low-Cost Goods
- Until now, consignments below the price of €22 were exempt from VAT. All goods imported will now be subject to VAT. To simplify the increase in goods qualifying for VAT, the Import One Stop Shop has been created.
- The Import One Stop Shop (IOSS)
- This is a special scheme for distance or cross-border sales of goods and services into the EU to simplify the declaration and payment of VAT.
- In case the IOSS is not used, special arrangements will be made for consignments costing below €150.
The benefits of updating the system will be seen broadly by businesses and consumers alike. The installation of the IOSS and the OSS assures consumers that the VAT rate applied to their online purchases from outside or inside EU borders is the same as purchases made within their home state. VAT is applied in the country where the buyer consumes or receives the good. The simplification and pervasive quality of the new system will see an increase in EU revenue with the influx of VAT payments and the easier prevention of fraudulent trade. It ensures a fairer, more competitive environment for trading within and across EU borders.
Retailer’s or wholesaler’s off licence for the sale of alcohol in Ireland
Do you want to sell wine, beer, liquor or other alcoholic beverages in Ireland as a retailer or a wholesaler? Then you will need to obtain a so-called retailer’s/wholesaler’s off licence. This can be achieved by completing an application process which includes the consultation of an Irish court.
The Chamber gladly assists you on your way to obtaining such a licence for the sale of alcohol in Ireland.
Our services includes:
- Consultation on the different procedures
- Application for the licence at court
- Communication with an Irish solicitor
- Annual renewal of the licence
- Overall cost estimate for the project
Property assessment and VAT registration for the trade of property in Ireland
You are thinking about purchasing or selling property in Ireland? The trade of real estate requires a reliable assessment of the property in question. However, several challenges can come up during the assessment process, like the potential registration for VAT in Ireland in some cases.
The Chamber gladly assists you with a trustworthy assessment of your (potential) property in Ireland.
Our services include:
- Consultation on the different possibilities and requirements
- Application to VAT
- Communication with the Irish Revenue
- If necessary: Contact and communication with an Irish solicitor
- Overall cost estimate for the project
Services for Businesses Entering the Irish Market:
When entering the Irish market, businesses must expect to pay VAT, corporation and income tax, and finally sector specific withholding taxes such as the relevant contract tax on construction works. Our consulting service DEinternational offers tax advice on all of the above levies and can handle all of your tax issues in Ireland. We are also happy to complete your registration for tax in Ireland and the filing of all the relevant returns.
- Information on applicable corporate income tax rates (generally 12.5% or 25% for passive income such as rental and interest income, for companies registered in Ireland but not resident for tax purposes, the corporate income tax rate is 25%. This is to prevent "letterbox companies" from paying 12.5% corporation tax.)
- Registration for corporation tax and filing of reports
- Advice on permanent establishments within the meaning of the German-Irish double taxation agreement, in particular for construction companies (presumption of permanent establishment after 12 months)
- Advice on start-up exemption, capital allowances, intellectual property, research and development
- Information on applicable tax rates (20% for income up to €35,300, 40% for income above €35,300)
- Consultation on Universal Social Charge rates, PRSI rates and A1 Form requirements (in particular with regard to posting of workers)
- Calculation of credits and exemptions according to double taxation agreements
- Registration for income tax and submission of declarations
- Advice for persons with income in Ireland and Germany regarding double taxation of income
We offer our clients a comprehensive service regarding VAT in Ireland.
The rates are as follows:
- 23% – standard rate (impending temporary reduction of VAT to 21% from Sep. 1 2020 due to effects of COVID-19 pandemic)
- 13.5% – "reduced rate", especially for services in the agriculture, cleaning and construction sector and car rentals
- 9% – "second reduced rate", mainly for certain foods, newspapers, admission to cultural and sports events and in the tourism sector
- 5.4% – flat rate compensation for farmers
- 4.8% – "livestock rate" for farm animals and greyhounds
- 0% – for staple foods and other goods that are deemed as necessary (e.g. children’s clothing)
This is just to give a rough overview. An individual case-by-case examination is always recommended.
Relevant Contract Tax (Construction Withholding Tax)
We assist companies with the registration for RCT and filing of returns. We also advise about if the services in question are liable to RCT.
Before a subcontractor can be paid the payment must be filed on Revenue’s online system so that the authority can check whether and how much RCT should be paid.
There are three different tax rates, depending on the amount payable to the subcontractor:
- 0% for companies that fulfilled their tax liabilities without any difficulties and on time in the last three years
- 20% for companies with an Irish tax number
- 35% for companies without an Irish tax number and/ or companies that did not meet their tax liabilities
If the payments are filed too late or not at all this may lead to fines up to 35% of the amount payable.
Normally subcontractors that pay the Irish RCT do not need to charge the VAT. In this case the main contractor is responsible for filing VAT returns as a “reverse charge”.
German Social Insurance Pension
Tax payments on the German Social Insurance Pension were taxable in Ireland under the Double Taxation Agreement between Ireland and the Federal Republic of Germany of 1962. When this agreement was updated in 2011, it transferred the tax payable to Germany instead of Ireland. In some instances this led to these payments being taxed both in Ireland and Germany as a result of overlapping obligations from the rules in the past and the updated agreement of 2011.
The German and Irish authorities concluded a Memorandum of Understanding on the 18th of December 2020 to address these challenges arising from the Double Taxation Agreement of 2011. This includes a ‘grandfathering clause’ for any Irish resident pensioners affected by taxation of German Social Insurance Pensions. The grandfathering clause allows for old rules to remain in practice for specific situations decided by the competent authorities. In this instance, it refers to German Social Insurance Pension payments being taxable in Ireland rather than Germany under the agreement of 1962.
The rules affect specifically the receivers of the German Social Insurance Pension; any other foreign pension payments from Germany are separate in nature and do not fall under the changes mentioned in this article.
The new rules are as follows:
German Social Insurance Pension payments made in Ireland on the 28th of November 2012 and thereafter are taxable in Germany.
However, payments made prior to that date may still be taxed in Ireland if the receiver of these payments is a resident of Ireland. To choose this option, the receiver of the relevant payments must make a Mutual Agreement Procedure (“MAP”) application through the Form MAP1, which should be sent to the competent authority of Ireland, who will consult with the competent authority in Germany to activate the grandfathering clause.
Click here to access the From MAP1
In situations where pensioners have been double taxed on their German Social Insurance Pension payments in Ireland and Germany, this may be addressed through the MAP and excess tax payments will be refunded where appropriate.
It should be noted that to continue to have these payments taxed in Ireland may not be advantageous for every individual and depends on the personal circumstances of each pensioner. For more advice or information on the matter, individuals are encouraged to contact Patrick Bamming from the German-Irish Chamber of Industry and Commerce.