What is an export supply?

An export supply within the meaning of Section 6 of the German VAT Act (UStG) is the supply of goods from Germany to a third country (outside the European Union). This supply is generally exempt from VAT (sec. 4 no. 1 letter a of the German VAT Act). It is important to note that the goods must actually be exported from the territory of the EU.

What counts as a third country?

Third countries are all countries outside the European Union, such as Switzerland, Norway, the USA, China or the United Kingdom (since Brexit). In other words, third-country territory is everything that is not EU territory (sec. 1 para. 2a sentence 3 of the German VAT Act). The territory of Büsingen, the island of Heligoland and the free ports, which actually belong to the Federal Republic of Germany, are also not part of the EU territory.

Types of export supply

• Direct export (sec. 6 para. 1 sentence 1 no. 1 of the German VAT Act)
  A direct export occurs when the supplier himself takes over the transport/shipment to the third country. It is irrelevant where the acquirer is established and whether the acquirer is a taxable person or not.

• Indirect export (sec. 6 para. 1 sentence 1 no. 2 of the German VAT Act)
  In the case of indirect export, the acquirer organises the transport/shipment to the third country. In this case, the acquirer must be established abroad. If the acquirer is established in Germany (country of departure), the export supply cannot be VAT-exempt. In this case, not only acquirers from third countries are considered to be established abroad, but also acquirers who are established in the EU. 

  Please note: Even if the goods reach the third country and this can be proven, the supply is not VAT-exempt if the customer is established in Germany and the customer collects the goods or has them collected.

   

Special cases of export supplies

Export supplies in personal luggage of travellers (sec. 6 para. 3a of the German VAT Act)

Export supplies of goods carried in personal luggage of travellers are VAT-exempt. The following conditions must be met:

• The goods are acquired for non-business purposes.

• The goods must have been transported by the traveller in its personal luggage to the territory of a third country.

• The traveller is not established within the EU territory.

• The value of the goods exceeds EUR 50 (including VAT).

• The goods must have been exported before the end of the third calendar month following the month in which the supply took place.

Proof of export is required for VAT exemption. The traveller must provide confirmation from the border customs office of an EU Member State that the goods have left the EU territory. Proof of export can only be provided after the sale. The supplier therefore usually invoices VAT first and refunds it to the traveller as soon as proof of export has been provided.

Equipment and fuel for means of transport (sec. 6 para. 3 of the German VAT Act)

Supplies for equipping or fuelling means of transport in the case of indirect export, i.e. when the acquirer transports the goods to a third country, are only VAT-exempt if

• the acquirer is an taxable person and

• the vehicle is used for taxable activities.

Processing of goods

If the goods are processed in Germany on behalf of the acquirer prior to export, this does not exclude VAT exemption. According to sec. 6 para. 1 sentence 2 of the German VAT Act, these cases still constitute export supplies if the remaining conditions are also met.

In these cases, the processing may also be VAT-exempt, see below: Contract processing of goods for export. However, it must be checked separately whether the requirements of sec. 7 of the German VAT Act are met.

Contract processing of goods for export

The processing or treatment (known as contract processing) of goods exported to a third country may be exempt from VAT (sec. 4 no. 1 letter a of the German VAT Act) if the requirements of sec. 7 of the German VAT Act are met. The VAT exemption applies to cases in which the goods were imported into the EU for the purpose of processing and subsequently re-exported to a third country. However, it also applies to cases in which the goods were first acquired in the EU and then exported to a third country after processing.

Please note: Before assessing whether contract processing is VAT-exempt, it should first be checked whether the supply can be considered contract processing at all and whether it is deemed to have been provided in Germany, i.e. whether it is taxable here. The following cases are conceivable:

• Work delivery (processing or treatment of a third-party item using essential materials procured by the supplier)

  à not contract processing, but work delivery with transport and thus, if applicable, export supply in accordance with sec. 6 of the German VAT Act (see above)

• Processing service (processing or treatment of a third-party item, whereby either no further materials are used or only ingredients/secondary materials or all materials are provided by the acquirer) 

  a) B2B: Place of supply according to sec. 3a para. 2 of the German VAT Act where the customer is established:

  • Foreign customer: not taxable in Germany

  • Domestic customer: taxable in Germany and, if applicable, VAT-exempt contract processing

  b) B2C: Place of supply according to sec. 3a para. 3 no. 3a letter b of the German VAT Act where the supply is actually performed

  à Taxable in Germany and, if applicable, VAT-exempt contract processing

As with export supplies, it also depends on who is responsible for transport/shipment to the third country. In the case of direct export, i.e. if the supplier takes care of transport/shipping to the third country, the place where the customer is established is irrelevant for VAT exemption. In the case of indirect export, i.e. if the customer organises transport/shipping to the third country, contract processing is only VAT-exempt if the customer is established abroad.

Proof of export

VAT exemption depends heavily on proper documentation of the export. The supplier who wishes to claim VAT exemption must provide evidence that he or the acquirer has transported or dispatched the goods to the territory of a third country:

Own transport by the supplier or acquirer (sec. 9 of the German VAT Implementation Regulation (UStDV)):

• Export declaration in the electronic export procedure à ATLAS export note

• All other export declarations àDocument (paper or electronic) with export confirmation from the border customs office.

Shipping by logistics service providers (Section 10 UStDV):

• Export declaration in the electronic export procedure à ATLAS exit note

• All other export declarations à shipping document (e.g. consignment note, bill of lading) or forwarding agent's certificate.