Money Matters

Money Matters

Picture showing a wallet | © photocase

Source: Picture showing a wallet | © photocase

Currency, Exchange Rates and Means of Payment

The ''Euro'' is the official currency in Germany as well as 16 other European countries including: Austria, Belgium, Cyprus, Finland, France, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain, and, as of January 1, 2011, Estonia. Thus, for trade and travel between these countries currency exchange is no longer necessary.

The European Central Bank (ECB) publishes Euro foreign exchange rates daily on its website. With the help of several online tools, you can also convert Euro amounts into other currencies and vice-versa.

Major credit cards are widely accepted at tourist destinations displaying the cards' logos. Additionally, an extensive network of ATMs is available, which usually accept at least VISA, Mastercard, Maestro and ec-cards. Traveler's Cheques are less common, but they can be cashed at banks and exchange offices. Travelers from EU countries can also profit from the simplified payment and transfer procedures in place in the Single European Payment Area.

Single European Payment Area

In the past, credit card payments, direct debits and bank transfers sometimes differed immensely from country to country in the EU, even after the introduction of the Euro. The different technical standards and transaction fees in the Euro countries further complicated intra-community trade.

The SEPA initiative of the European Banking Industry was subsequently enstated in order to simplify electronic payments within the Eurozone so that national and international transactions can both be performed with the same level of ease. The initiative is represented by the European Payment Council and supported by the European Central Bank and the EU Commission. In Germany, the Central Credit Committee (CCC) and the German Bundesbank represent German banking interests in SEPA projects.

With the help of the necessary legal framework at the EU and national levels, SEPA has simplified the following transactions:

  • banking fees, time frames for crediting accounts and IT banking infrastructure have been standardized in SEPA countries.
  • funds can be transferred electronically from any account set up in a SEPA country to any other SEPA account, just like in the home country.
  • direct debit payments from both businesses and consumers located in SEPA countries can be made anywhere in SEPA.
  • any credit card issued in SEPA is valid for payment and/or for withdrawals at ATMs in the entire area.

The legal foundation for these changes was laid by the EU Payments Service Directive which was transposed into German law on November 1, 2009. These new standards continue to strengthen the European Monetary Union and are already in place in over 4400 banks in more than 32 participating countries (EU Member States, Iceland, Liechtenstein, Monaco, Norway and Switzerland). SEPA taskforces are currently working on projects aimed at simplifying internet and mobile phone payments as well as the international transport of cash.

Tax Free Shopping

All products sold in Germany are liable for a value-added tax (VAT). The general rate is 19 percent, however the reduced rate of seven percent is used for magazines, books and food. These rates are similar to sales taxes elsewhere; however, VAT is always included in a product's list price.

Many shops and outlets in Germany have joined a refund system which uses tax-free cheques issued by a tax-refunding service provider. Customers from non-EU countries who plan to take an item home may request a refund cheque upon purchase in order to have their VAT refunded. When leaving the European Union, the goods must first be presented to a customs officer, who will stamp the tax-free cheque, thus verifying the goods will be exported. The cheque can then be turned in to and refunded by the tax-refunding service provider. These service companies generally operate at major airports, ferry ports and other ports of entry and exit.

Alternatively, customers can also forward a completed proof of export form along with proof of the customer's foreign residence directly to the vendor, who can then refund the VAT collected. The buyer can save him or herself the aforementioned service charge but must handle the necessary paperwork him or herself and may be refunded less, in the end, as a result of bank fees for international money transfers. More information on this procedure and on tax free shopping in general is available from the German Customs Administration.