What's the difference between VAT exempt and zero-rated (0%)?

Zero-rated (0%) items: suppliers charge no VAT but can reclaim input VAT. Exempt items: suppliers charge no VAT and cannot reclaim input VAT. Germany uses 0%, 7%, and 19% rates.

What foods qualify for 7% reduced VAT in Germany?

The 7% reduced rate applies to: bread, cereals, dairy, meat, fish, fruits, vegetables, chocolate, coffee, tea. Exceptions: catering, hot/prepared food, and alcohol are 19%.

What qualifies for 0% zero-rated VAT in Germany?

Zero-rated (0%) applies to: intra-EU supplies with valid VAT ID, exports outside the EU. Most German domestic sales are either 7% (food, books) or 19% (standard).

Is health insurance VAT exempt in Germany?

Yes. Health insurance, car insurance, and other insurance services are VAT exempt in Germany. Providers cannot charge VAT and cannot reclaim input VAT.

What VAT rates apply to medicines in Germany?

Prescription medicines: 19% standard rate. Over-the-counter medicines: 19% standard rate. Some medical equipment and aids: 7% reduced rate. Disabled person aids: 7%.

MwSt-befreite Waren Deutschland

Mehrwertsteuerbefreiung vs. Nullsatz: Was ist der Unterschied?

Nullsatz (0 %)

Customer Pays

0% VAT

Supplier Can Reclaim VAT

Yes, input VAT is reclaimable

Beispiele

Food, children's clothing, books, medicines

For Business: Zero-rated is better – you get full input VAT relief while charging 0% to customers.

VAT Exempt

Customer Pays

No VAT (0%)

Supplier Can Reclaim VAT

Nein, Vorsteuer kann nicht zurückgefordert werden

Beispiele

Insurance, finance, education, health

For Business: Exempt items cost more to supply because input VAT is a cost, not recoverable.

Wichtiger Punkt: Customer pays the same (nothing) in both cases, but the business impact is very different. This is critical for VAT planning.

Nullsatz-Artikel (0% Mehrwertsteuer)

Food & Drink

• Fresh fruit and vegetables
• Meat and fish (uncooked)
• Bread and cereals
• Milk and dairy products
• Eggs
• Non-alcoholic beverages
Excluded: Hot/takeaway food, catering, confectionery

Children's Clothing

• Shoes and boots (under 6.5 to size 5.5/6)
• Clothing items sized for children
• Growth pads for shoes
• Clothing for average child height/weight
Excluded: Adult clothing, costumes, school uniforms

Books & Publications

• Books and booklets
• Newspapers and periodicals
• Maps and globes (for educational use)
• Religious materials
Excluded: Advertising material, e-books, magazines with ads

Public Transport

• Bus and coach services
• Train and tram services
• Underground rail
• Passenger ferries
Excluded: Luxury/private transport, parking

Prescription Medicines

• Prescription drugs and medicines
• Medical equipment on prescription
• Oxygen and respirators
Excluded: OTC medicines (standard rated), supplements

Water & Sewerage

• Domestic water supply
• Domestic sewerage services
• Waste water treatment
Excluded: Non-domestic water, industrial use

Reduced Rate Items (5% VAT)

Domestic Fuel & Power

• Electricity (domestic)
• Gas (domestic)
• Solid fuels for heating
• Oil heating

Safety & Child Seats

• Child car seats and booster seats
• Installation of child seats

Smoking Cessation

• Nicotine patches and gum
• Prescription smoking cessation products

Energy-Saving Materials

• Insulation materials
• Energy-saving windows
• Installation of energy-saving items

VAT Exempt Items (No VAT, No Input Recovery)

Insurance & Pensions

• Life insurance
• Car, home, travel insurance
• Pet insurance
• Pension advice and administration
Brokers' commissions are also exempt

Finance & Banking

• Loans and credit provision
• Interest and transaction fees
• Money transfers and exchanges
• Payment card services

Education & Training

• School and university tuition
• Vocational training by approved providers
• Exam fees (certain types)
Note: Corporate training is often standard rated

Health Services

• Medical treatment and services
• Dental and optical services (some)
• Health clinic services
• Physiotherapy (by registered providers)

Burial & Cremation

• Funeral services
• Burial plots and maintenance
• Cremation services
• Gravestones and memorials (supplies)

Postal & Property Services

• Royal Mail letter post
• Leasing/renting of property (mostly)
• Agricultural land rental

Standard Rate (19% VAT)

If something is not zero-rated, reduced-rated, or exempt – it's standard rated at 20%.

Common 20% Items

• Most food (hot/takeaway, confectionery)
• Alcohol and tobacco
• Adult clothing and footwear
• Electronics and appliances
• Furniture and household goods
• Construction and repairs
• Professional services
• Restaurants and takeaways

Services in 20% Category

• Hairdressing and beauty
• Repairs (goods and property)
• Delivery and shipping
• Accommodation (hotels, B&B)
• Entertainment and entry fees
• Car rental
• Pet services
• Most professional services

Why It Matters for Your Business

Input VAT Reclaim

If you sell zero-rated items, you can still reclaim input VAT on costs. This improves cash flow.

Beispiel: Bookstore buys stock (zero-rated) and can reclaim input VAT even though they sell at 0%.

Cost Impact

Exempt services cannot reclaim input VAT, so costs are higher. This affects pricing strategy.

Beispiel: Insurance broker bears the cost of VAT on their office rent and cannot reclaim it.

VAT Return Impact

Zero-rated income with VAT input reclaim = VAT refund. Exempt income = no refund opportunity.

Result: Businesses selling zero-rated goods often receive VAT refunds.

Mixed Sales

Businesses selling both standard and exempt items need to apportion input VAT.

Complexity: Proper accounting and VAT apportionment is essential.

Häufig gestellte Fragen

It depends on whether it's confectionery. Chocolate cakes are confectionery (20%), while plain cakes are zero-rated. Catering (cakes decorated to order) is standard rated. The presentation and decoration matter.

You cannot reclaim input VAT on exempt supplies. That's the rule. However, input VAT on costs directly related to standard-rated supplies can still be reclaimed (use apportionment if mixed).

The customer pays the same (0% or the regular price without VAT added). Business-to-business exempt supplies don't require a VAT number to be verified – they're automatically exempt. Consumer customers simply pay the base price.

Yes. Imports of zero-rated items (like food) are zero-rated. Importe nach Deutschland unterliegen der Einfuhrumsatzsteuer. Check the tariff code and supplier location.

Check Finanzamt's VAT Notice 700/1 (The VAT Guide). Use the VAT product finder tool on Finanzamt website. When in doubt, ask a tax advisor. The distinction is important for your VAT return.

Need VAT Help for Your Business?

Use our calculators and guides to understand your VAT obligations.

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