Fiscal Representation for Foreign Companies
Since the beginning of 1997, it has been possible for companies domiciled abroad to arrange for a fiscal representative for VAT purposes in Germany, to a limited extent ("minor fiscal representative"). This fiscal representative system pursuant to Arts. 22a-22e Value Added Tax Act (UStG) is of particular interest for companies from third countries (i.e. non-EU states) which import goods into Germany via the Port of Hamburg, and subsequently deliver them onward (VAT-free) to other EU states outside of Germany. That saves these companies, which do not have their own offices in Germany, the administrative effort of VAT registration in Germany, and thus the associated declaration obligations. The use of a fiscal representative is voluntary in Germany, unlike the situation in other EU countries. So a foreign company can either have itself represented for VAT purposes in Germany by a fiscal representative, or it can itself register for VAT purposes, and fulfil the tax duties arising for VAT purposes itself. This information sheet is available in German and in English translation.
When does fiscal representation come into consideration?
Fiscal representation is possible under Art. 22a Value Added Tax Act (UStG) for companies located abroad which conduct business in Germany exclusively free of VAT, and for which no input tax amounts can be deducted. The company based abroad most not have its domicile, its registered office, its top management or a branch office either in Germany or in the German tax-free areas (e.g. the Free Port).
Application cases of fiscal representation, as set out in the Circular of the Federal Finance Ministry of 11 May 1999 (PDF-Datei · 926 KB), may in particular include the following:
- Tax-free imports, not followed directly by intra-Community delivery (Art. 5 para. 1 No. 3 UStG)
- Tax-free intra-Community acquisitions, which are not followed directly by intra-Community delivery (Art. 4b No. 4 UStG)
- Tax-free cross-border transportation of objects within the meaning of Art. 4 No. 3 UStG, where the company does not acquire deliveries or services for which it can deduct input tax under Art. 15 UStG.
What are the practical situations where a fiscal representative is relevant?
The possibility of fiscal representation is of practical interest particularly for companies based in the EU which acquire goods from third countries via the Port of Hamburg.
Example 1: "Import via Germany with clearance for free circulation in the Community"
A company based in Austria agrees with a supplier from the USA on delivery of goods "ex works" or "free destination customs office Hamburg" and imports the goods into the Community territory via the Port of Hamburg. Thus in both cases the Austrian company fulfils the definition of import set out in Art. 1 para. 1 No. 4 Value Added Tax Act (UStG). This import is free of VAT under Art. 5 para. 1 No. 3 UStG if the Austrian company declares the transportation of the goods at its disposal to Austria via Germany as intra-Community supply. However, that requires the Austrian company to have its own VAT registration in Germany and to meet various declaration obligations vis-à-vis the German tax authorities (VAT Annual Declaration, Summary Report, if applicable Intrastat Declaration). This administrative effort can be avoided by use of a fiscal representative.
Example 2: "Fiscal representation for suppliers from third countries – free domicile, customs and taxes paid"
A supplier in the USA agrees with a company in Hungary on delivery of goods "free domicile, customs and taxes paid". The supplier imports the goods into Germany via the Port of Hamburg. In this case the American supplier fulfils in Germany the definition of import (Art. 1 para. 1 No. 4 in conjunction with Art. 3 para. 8 UStG). This import is free of tax pursuant to Art. 5 para. 1 No. 3 UStG if the supplier declares intra-Community supply to Austria following import. In order to claim exemption from tax, the American supplier must have its own VAT registration in Germany and must fulfil various declaration obligations vis-à-vis the German tax authorities (VAT Annual Declaration, Summary Report, if applicable Intrastat Declaration).
Here again, this administrative effort can be avoided by use of a fiscal representative.
Here again, this administrative effort can be avoided by use of a fiscal representative.
Example 3: "Fiscal representation for suppliers from third countries – free destination customs office Germany"
Delivery "free destination customs office Germany" was agreed between the supplier from a third country, and the customer in another part of the Community.
A company U, domiciled in the USA, agrees with its customer F in France on delivery free port of Hamburg, customs duty and tax unpaid. The US company imports the goods into the Community territory via Germany. In Germany this constitutes import (as defined in Art. 1 para. 1 No. 4 UStG). This import is free of tax provided that the company declares in Germany the transport of the goods for availability in another part of the Community area as intra-Community supply. Here again, use of a fiscal representative can reduce the administrative effort (VAT Annual declaration, Summary Report, if applicable Intrastat Declaration).
Example 4: "Export via Germany with preliminary intra-Community acquisition"
A company F1 from France receives from another company F2 from France an order for delivery of goods "FOB or FAS Port of Hamburg". The goods are then exported to Japan (third-country territory). Delivery by F1 to F2 is free of tax, as intra-Community supply, because F2 uses a German VAT Reg. No. The subsequent intra-Community acquisition by F2 if free of tax pursuant to Art. 4b UStG. For this purpose, a fiscal representative could act for F2 in Germany.
The same thing applies if a company F domiciled in France agrees with a customer B domiciled in Belgium on delivery "free Port of Hamburg". After delivery, the Belgian customer B then exports the goods to Japan (third country) for its customer J. B acquires the goods free of tax by way of intra-Community acquisition (Art. 4b No. 4 UStG) and then exports them free of tax (Art. 6 UStG) with the obligation for submission of an annual VAT Declaration and if applicable Intrastat Declaration.
Who can act as a fiscal representative in Germany?
Fiscal representation in Germany can be undertaken only by the persons specified in Arts. 3 and 4 No. 9 sub-clause c) Tax Consultancy Act:
- Tax consultants, tax advisors and tax consultancy firms (Steuerberater, Steuerbevollmächtigte, Steuerberatungsgesellschaften);
- Lawyers, accountants, accounting firms, sworn auditors and auditing companies;
- Forwarding agents, where they provide support in initial submissions or handling of excise duties dealing concerning the movement of goods between member states of the european union;
- Other commercial companies, where they provide support in initial submissions related to customs treatment (e.g. customs declarers, warehouse keepers).
These persons receive from the tax authorities the separate tax number and separate VAT Reg. No. if they can substantiate their intention to act as fiscal representative. In practical terms, forwarding agents and customs declarers in particular come into consideration as fiscal representatives, because they already fulfil the customs declarations obligations and reporting obligations in clearance of third-country products for the foreign company.
What are the functions of a fiscal representative?
The fiscal representative has to fulfil as its own obligations the obligations of the company domiciled abroad, which the latter has to fulfil pursuant to VAT legislation. On application, it receives a separate tax number from the German tax administration for this purpose, and a separate VAT Reg. No.
- It submits a VAT declaration for the calendar year under the separate tax number. That summarises the tax basis for all foreign companies which it represents; individual data are not required. Under the separate VAT Reg. No., the fiscal representative stands for all the companies with domicile abroad which it represents. The annual declaration is normally to be submitted until the last day of February of the tax period following second calendar year (Art. 149 para. 4 No. 4 Tax Code). The measurement basis is to be given separately for internal deliveries and tax-free intra-Community acquisitions. A "0" is to be entered for the payment obligation.
- The fiscal representative is also required to submit a Summary Report by the 25th day after expiry of a calendar month to the Federal Central Tax Office (Bundeszentralamt für Steuern), unless it has exemption because the total turnover of the companies represented by it in the preceding calendar year did not exceed the amounts indicated in Art. 18a para. 9, Art. 18 para. 2 UStG. As long as the amount of the tax base for inter-community deliveries and for deliveries according to Art. 25b para 2 UStG, neither in the current calendar quarter nor in the previous four calender quarters were more than 50.000,- Euro, the Summary Report can be submitted until expiry of the 25th day of the calendar quarter. For this purpose it is necessary for the fiscal representative to give the necessary details on the basis of the duplicate of the invoice of the company represented by him.
- The fiscal representative is required to fulfil the general recording duties pursuant to Art. 22 UStG.
The recording duties and the requirement for retaining records are fully transferred to the fiscal representative. He has to provide the same documentary evidence as a normal exporter, i.e. for intra-Community deliveries as specified in Art. 17a para. 1 UStDV, Art. 17b paras. 2 and 3 UStDV and for export deliveries as specified in Arts. 9 and 10 UStDV.
d. The fiscal representative has the same rights and obligations as the foreign company represented by him. He can submit applications to the tax administration. Thus he can have the VAT Reg. No. communicated to him checked by the Federal Central Tax Office.
If a fiscal representative is used, the foreign company does not have to obtain VAT registration in Germany, and does not have to meet any declaration obligations vis-à-vis the German tax authority.
What conditions have to be met for use of a fiscal representative?
a) A condition for fiscal representation is that the foreign company represented does not conduct any turnover subject to VAT in Germany. German tax law recognises only the "minor" fiscal representative (Arts. 22a et seq. UStG). Fiscal representation is permissible only under the following conditions:
- If the foreign company conducts exclusively tax-free transactions in Germany and cannot deduct input VAT (Art. 22a para. 1 UStG);
- But if a foreign company not only has tax-free transactions in Germany but also tax-liable transactions, he is not permitted to use fiscal representation even for the tax-free transactions;
- A foreign company which wants to make use of a fiscal representative is therefore not permitted to have its domicile or registered office or a subsidiary in Germany or in German tax-free areas (e.g. the Free Port).
b) With respect to the goods imported, the following conditions must also be fulfilled:
- The goods must come from a third country and have as their final destination another EU country apart from Germany. Customs clearance is effected in Germany, whereby exemption from import VAT is applied for.
- After customs clearance, the goods are dispatched for delivery directly as intra-Community supply to the other EU country. There the goods are subject to acquisition tax with the acquiror, in accordance with the rules of the acquiror's country.
What does the foreign customer have to observe?
- In order to make use of the possibility of fiscal representation, the foreign company must authorise a person entitled to be a fiscal representative in Germany, before exporting his goods to Germany, i.e. before import of the goods via the Port of Hamburg (Art. 22a para. 3 UStG). In its own interest, the foreign company should apply the necessary care and diligence in selection of a trustworthy fiscal representative, in order to ensure fulfilment of the VAT obligations. If he has any doubts as to the reputability of the intended person, the foreign company should contact the local international chamber of commerce.
- A foreign company can have itself represented in Germany by a number of fiscal representatives. The representation applies only to the extent of the powers granted, for example only for deliveries from a certain supplier. If general powers of representation have already been granted to a forwarding agent, that is not sufficient – separate powers have to be granted for fiscal representation. The particulars which should be contained in such assignment of powers are shown in the specimen form attached to this information sheet for granting of powers of fiscal representation (PDF-Datei · 36 KB).
- After the foreign company has appointed a fiscal representative in Germany and granted it the powers for that purpose, it must put the following supplementary indications on all invoices for tax-free sales effected in Germany, pursuant to Art. 22c UStG:
- Indication of fiscal representation;
- Name and address of fiscal representative in Germany; and
- VAT Reg. No. of fiscal representative.
- A duplicate of each invoice is to be given to the fiscal representative. This also applies to pro forma invoices for company-internal transport operations.
- Fiscal representation is terminated by revocation of the powers, or automatically if the foreign company effected tax-liable sales in Germany and/or becomes entitled to offset input tax amounts. Fiscal representation is also terminated by prohibition of the activity, or if the fiscal representative repeatedly infringes the obligations imposed on it, for example if it does not keep the invoices for 10 years, or if it does not submit VAT declaration or Summary Report in due time. The foreign company then has sole liability for any VAT amounts owed.
- No domestic input tax can be applied to the services of a fiscal representative, because the services of the fiscal representative are not taxable in Germany. In accordance with the above mentioned BMF Circular, the place of supply of fiscal services is determined by Art. 3a para. 3 and para. 4 No. 3 UStG. The fiscal representative thus supplies his services at the place where the company represented by him operates its business. If the company represented (recipient of services) is domiciled in another EU member state and the fiscal representative himself is not domiciled there, the company which is registered for tax purposes in that member state owes the VAT for fiscal representation in said member state (Art. 21 No. 1 sub-clause b of 6th EC Directive). In that case the fiscal representative may invoice neither the foreign VAT nor German VAT.
Click here for specimen form for granting Powers of Fiscal Representation (PDF-Datei · 36 KB).
You can also read our information sheet Trading Goods in the EU.
For further information, please contact your responsible Chamber of Industry and Commerce. To search for the IHK which is competent for your company please use the IHK-Finder.
Despite careful checking, we can undertake no guarantee for the accuracy of this information.
Status: February 2020