ZM – The Zusammenfassende Meldung

One of the lesser known parts of the German tax system is simply called the “ZM”, which stands for “Zusammenfassende Meldung”.  For anyone running a business in Germany, it is another form to fill in on a regular basis.

It all has to do with the VAT (Value Added Tax) system within the European Union.  Put quite simply, if you buy something in a shop or pay for a service, then you pay VAT.  For consumers, that’s the end of the story.  The shop owner or service provider pays the VAT on to the tax office.

But if the customer is a business as well, they usually have a way to claim that tax back again from their local tax office (although there are some exceptions).

In Germany, at least, the VAT system means that a business only actually pays the difference between the VAT they have to pass on from selling goods to the consumer, and the VAT that they can claim back from their own purchases.  A new business making a loss may even get VAT repaid from their tax office.

Except that the system normally only allows EU businesses to do this within their own tax system.

Now apparently there are ways and means to claim back VAT from another country, but it’s not something that I’ve ever done because on the rare occasion it has applied to me (eg. a hotel bill or filling up with petrol), the amount has been fairly small and not warranted the effort.

It’s a different matter if the figures are higher or the payments are more frequent.  And so, under certain circumstances, companies are allowed to use something called the “reverse charge” arrangement.

Under the agreement, business who writes an invoice for another business can leave the VAT off the invoice by citing the agreement and both company’s tax numbers (in Germany that’s called the USt-IdNr.)  The company doing the selling then declares this on their own VAT return.

Sounds complicated?  Believe me, it is.  And to keep tabs on it all there is, in Germany at least, a national tax office that also needs to be told of any income you receive under this system.  That office is in a town called Saarlouis near the French border.  And the form to fill in to let them know how much you earned, is called the Zusammenfassende Meldung.

All of this would probably not bother many small businesses if they are only selling within their own markets.  Except for the fact, that at least two major players on the internet advertising front use it.  They are also the reason that I have to fill one out on a regular basis.

They are Amazon (with their associates programme) and Google (with AdSense).

Both pay out to website owners on a commission or per click basis.  And both pay out to business website owners using the reverse charge system.

So if you have a website in Germany with Amazon advertising on it, you can probably expect (or should that be hope?) to come into contact with the Zusammenfassende Meldung at some time.

But if you’re not self-employed and don’t own a business (and don’t work in the finance department of one), then you may never see one!

This article is intended to be an overview of what the ZM is and should not be considered as binding tax advice.  For more information, please contact a German tax adviser (Steuerberater).