Although those who voted to leave the EU don’t like to admit it, the eurozone is the UK’s largest trading partner, but it’s very much a two-way street – if you examine both imports and exports it becomes apparent the eurozone economies do more business with the UK than any other nation.
The UK accounted for 14% of eurozone exports between 2007 and 2011 and 10% and more recently it took over Fance and USA to become Germany’s single largest trading partner – in the first three quarters of 2012 Germany’s combined trade with the UK came to £128 billion (€153 billion).
If you’re looking to do business there, here’s everything you need to know about exporting to Germany…
What are the pros and cons of exporting to Germany?
Germany is the UK’s largest export market in Europe and second largest globally after the US. The top 10 industries currently exporting to Germany are:
- Machines, engines, pumps
- Electronic equipment
- Medical, technical equipment
- Organic chemicals
- Aircraft, spacecraft
- Iron and steel.
Germany has a gross domestic product (GDP) of more than €2.7 trillion that makes it the largest economy in Europe and the fourth largest in the world. It’s also is the UK’s largest export market in Europe and second largest globally after the US. The UK’s market share of German imports is around 4.7%.
The strengths of the German market include:
- strong industrial base
- hosts 65% of the world’s international trade fairs
And the benefits of exporting to Germany are:
- one hour from the UK by air
- easy access to eastern Europe
- English widely spoken and accepted as a business language
- strong domestic consumer market due to population of 81 million and resilient economy
As far as challenges go, if you’ve a successful product or service in the UK, there’s every chance it’ll be a success in Germany. The German market is extremely competitive though and some companies have a ‘buy local’ attitude.
So it’s important British companies not only offer something unique in order to stand out, they also need to be patient and persistent.
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How does tax work in Germany?
A double taxation agreement exists between the UK and Germany, so tax isn’t paid twice – once in each country – on exported goods and services.
VAT is charged at a rate of 19%. 7% on convenience goods and services needed on a day-to-day basis such as food, newspapers or public transport. Some services including banking, healthcare and non-profit work are exempt from VAT.
If you’re exporting to Germany from the UK, your goods will be zero-rated for VAT purposes if your customer provides their VAT registration number (‘Umsatzsteuer-Identifikationsnummer’ or ‘UST-IdNr’) and you have proof of export.
You’ll need to get the VAT registration number of your German customer for your VAT return and paperwork to prove the goods have been sent within certain time limits (usually 3 months), and then:
- record all the goods sold to Germany on your VAT Return
- fill in an EC Sales List
- fill in an Intrastat declaration if your total dispatches are worth more than £250,000
Germany does not have a nationwide tax rate for companies. Corporate tax rates average about 30% depending on the local municipality. Go to Germany Trade and Invest to find out more about Corporation tax.
How will I be affected by customs in Germany?
The internal EU single market allows for the free movement of goods and services without any import duties being applied, and testing is mandatory for some imported goods, especially technical and electrical equipment.