Value added tax - submit annual return or advance return
The turnover tax is also called value added tax.
It is subject to, among other things
- supplies (e.g. sales of goods) and other services (e.g. repairs, consultancy services, etc.) which are carried out within the country against payment within the framework of a business,
- the importation of goods from non-EU third countries (the import VAT incurred is collected by customs), and
- the purchase of goods from European Union countries (so-called intra-Community acquisition).
Assessment basis and tax rate
The basis of assessment is normally the net price, to which the VAT is added. If a gross price (i.e. the VAT is already included) has been agreed, the VAT must be deducted.
There are two tax rates in Germany:
- The general tax rate of 19 %, to which most turnover is subject,
- the reduced tax rate of 7 %. The latter applies in particular to transactions for basic human needs (e.g. most food, books, newspapers, cultural events, public transport journeys).
To support the sectors particularly affected by the Corona pandemic, the reduced VAT rate of 7 % applies to restaurant and catering services (except for the supply of beverages) for a limited period until 31 December 2022.
The tax office from whose district the business is wholly or predominantly operated.
All services performed in Germany for remuneration within the framework of a business are subject to German turnover tax. According to the definition in § 2 Para. 1 of the Value Added Tax Act, you are an entrepreneur if you carry out a commercial or professional activity on a self-employed basis. In this case, you must generally charge turnover tax on your services. However, there are exceptions, e.g. for companies with only a small turnover (so-called small business regulation, § 19 Umsatzsteuergesetz - UStG) or if a tax exemption applies to the respective turnover.
Any activity that is intended to generate income on a permanent basis is considered to be commercial or professional.
The ability to be an entrepreneur is therefore possessed by all
- natural persons (individuals who run a business within the meaning of the VAT Act, e.g. retailers, craftsmen, homeowners),
- legal entities (e.g. AG, GmbH, cooperatives, registered associations, foundations) and
- Associations of persons (e.g. GbR, OHG, KG)
Small business regulation
The so-called small business regulation (§ 19 UStG) is a simplification regulation provided for by law for businesses with only a small turnover, in which the levying of turnover tax is waived. They can make use of the small business regulation if their total turnover (§ 19 para. 3 UStG) did not exceed € 22,000 in the previous calendar year and is not expected to exceed € 50,000 in the current calendar year. However, due to the fact that turnover tax is not levied, you cannot claim an input tax deduction for services received.
If you start your business activity during the calendar year, the turnover limit of € 22,000 is decisive for the application of the small business regulation in the year of foundation, i.e. a forecast of the expected turnover is necessary. If you start your business during the year, the estimated total turnover must be extrapolated to the full calendar year.
Note: If you make use of the small business regulation, you may not show turnover tax separately in your invoices.
Annual VAT return
You must submit a VAT return electronically to the tax office for each calendar year. In it, you calculate the VAT yourself.
If your calculation results in an additional payment, you must pay this to the tax office within one month of submitting the annual return without being asked to do so. A refund amount will be offset against outstanding tax amounts or transferred to the account you have notified the tax office of. You will only receive a VAT assessment notice if the tax office differs from the VAT you have calculated.
Advance VAT return
As an entrepreneur, you are required to submit advance VAT returns electronically to the tax office on a monthly or quarterly basis. The submission period in the current year is regularly determined by the amount of the previous year's tax. The following rules apply, among others:
- If the turnover tax for the previous calendar year amounted to more than 7,500 euros, advance turnover tax returns must be submitted monthly in the current year.
- If the previous year's VAT did not exceed 1,000 euros, the tax office can exempt you from submitting advance VAT returns. In this case, only one annual return must be submitted.
- If there was a surplus in your favour of more than 7,500 euros for the previous calendar year, you can choose the calendar month as the advance return period instead of the calendar quarter.
- If you are setting up a new business, the advance return period is based on the expected tax in the year of establishment. The aforementioned amount limits apply. However, exemption from the submission of advance tax returns is excluded.
- If you apply the small business regulation (19 UStG), you are generally exempt from submitting advance VAT returns and the annual VAT return.
The advance return must be received by the tax office no later than the 10th day after the end of the advance return period (quarter, month); at the same time, you must pay the self-assessed tax on your own initiative. The tax office does not issue a separate request for payment.
Extension of the tax deadline
The tax office can extend the deadline for submitting the advance tax returns and for paying the advance payments by one month. In the case of monthly returns, the granting of this extension is dependent on a special advance payment being made. If you wish to make use of a standing extension for the submission of current advance VAT returns, you must apply to the tax office beforehand.
Obligation to authenticated electronic transmission
You must transmit the advance return for VAT, the application for extension of the standing deadline and the VAT return to the tax authorities in an authenticated electronic form. You can obtain the electronic certificate required for this at www.elster.de.
- Due to the Corona pandemic, the legislator has extended the tax return deadlines. You therefore do not have to submit your annual VAT return for the year 2021 until 31.10.2022 at the latest. If you use the help of a tax advisor and this person prepares the return, the deadline is extended to 31.08.2023. For the agricultural and forestry sector, different deadlines apply for the submission of the 2021 VAT return (30.04.2023 or 31.01.2021 in the case of tax advice)
- Advance VAT return: no later than the 10th day after the end of the advance return period (month/quarter)
Upon request, the tax office may extend the deadline for filing the advance return and for paying the advance payments by one month. If you file monthly, the granting of this extension is dependent on you paying a special advance payment. You must submit the application for extension of the permanent deadline electronically to the tax office. Information on this can be found at www.elster.de.
In individual cases, you may have to submit further documents in addition to the advance VAT return or annual VAT return, such as incoming invoices, contracts or similar.
An information brochure for start-ups is available for download on the website of the Ministry of Finance and Economic Affairs of Baden-Württemberg. It also answers questions on turnover tax that arise in connection with starting a business. You can also obtain information from your tax office.
21.07.2022 Oberfinanzdirektion Karlsruhe als Vetreterin des Finanzministeriums Baden-Württemberg