Client Success Stories Case 2: Stopping Unnecessary VAT Payments in Germany

The Situation
A German Shopify merchant selling consumer electronics had been applying 19% German Umsatzsteuer on all customer orders. The goods were shipped directly from Shenzhen, China, to customers in Germany.

The Problem
According to Umsatzsteuergesetz (UStG) §3, the place of supply for goods dispatched by the supplier is where the transport begins. Since the goods originated in China, the place of supply was outside Germany, meaning German VAT should not have been applied.

As a result, the seller was not only overpaying VAT to the German tax office (Finanzamt), but also losing competitiveness because their prices were artificially 19% higher than they needed to be.

Our Approach

  1. We conducted a compliance review of the client’s sales channels and invoicing setup.

  2. We explained to the client that VAT was not due in Germany at the point of sale, but instead payable by the customer at import.

  3. We prepared documentation referencing UStG §3(6) and the EU VAT Directive Article 32, ensuring the seller’s compliance position was legally strong.

  4. Shopify settings were updated to remove unnecessary VAT charges for non-EU origin shipments.

  5. We trained the client’s accounting team to clearly separate EU-based and non-EU-based transactions.

The Outcome

  • Within three months, the business stopped charging German VAT on dropshipped imports.

  • Customers were no longer double-charged, improving trust and reducing complaints.

  • Profit margins improved by 12%, since the business no longer absorbed unnecessary VAT payments.

  • The Finanzamt accepted the new compliance model with no penalties.

Key Takeaway
German VAT rules are strict, but also clear: if goods ship from outside the EU, VAT should not be charged at checkout. Structuring your Shopify or WooCommerce correctly makes all the difference.

Selling into Germany? Let us review your VAT setup and protect your margins from unnecessary costs.

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