What is the purpose of quarterly taxes

Advance VAT return

The purpose of the advance VAT return

Although sales tax is an annual tax, the state insists that the entrepreneur submit the sales tax return either quarterly or monthly.

In this way, the risk of non-payment on the part of entrepreneurs, which would be very high if sales tax had to be paid once a year, is to be significantly reduced.

In addition, the state would like to obtain an interest rate advantage in any case. However, it should not go unmentioned that the entrepreneur enjoys some advantages through the VAT return.

By distributing the tax burden evenly over the year, payment difficulties should be avoided at the end of the year. If there is a sales tax reimbursement, the entrepreneur would also have the opportunity to obtain a considerable interest advantage.

Submission of the advance VAT return

It has been possible to submit advance VAT returns electronically for many years. Since January 1, 2013, it has no longer been possible to deviate from this rule.

Every entrepreneur subject to VAT needs an ELSTER certificate, which can be applied for at any time and then stored as a file on your own PC.

  • The pre-registration must be submitted either monthly or quarterly. Which period is valid in each case is not decided by the entrepreneur, but by the tax office. Only the sales tax payable for the previous calendar year is decisive for this. If it was not higher than 1,000 euros, the entrepreneur can be exempted from submitting the advance notification under certain circumstances. In the vast majority of cases, however, this is not possible immediately, but only after three years. The tax office will provide further details on request.

In the case of a sales tax payable amount of 1,001 to 7,500 euros, the pre-registration must be submitted quarterly and for a sales tax payable over 7,500 euros monthly.

All newly founded companies that expressly waive the small business regulation are an exception. In principle, there is always a monthly tax obligation for them.

Deadline for submitting the advance VAT return

The deadline for a monthly pre-registration is always the 10th of the following month.
In the case of a quarterly advance notification, the 10th of the first month following the quarter would be decisive.

Quarterly submission of the pre-registration:

1st quarter from January 1st to March 31st: Deadline: April 10th
2nd quarter from April 1st to June 30th: Deadline: July 10th
3rd quarter from July 1st to September 30th: Submission deadline: October 10th
4th quarter from October 1st to December 31st: Submission deadline: January 10th of the following year

Monthly submission of the pre-registration:
  • January Deadline: February 10th
  • February submission deadline: March 10th
  • March Deadline: April 10th
  • April Deadline: May 10th
  • May Deadline: June 10th
  • June Deadline: July 10th
  • July Deadline: August 10th
  • August Deadline: September 10th
  • September Submission deadline: October 10th
  • October Deadline: November 10th
  • November Deadline: December 10th
  • December Submission deadline: January 10 of the following year

The entrepreneur is not only obliged to submit the advance VAT return by the due date, but also to pay the VAT to the tax office.

The basis for calculation is always the difference between input tax and sales tax.

Target taxation and actual taxation

All entrepreneurs who are subject to debit taxation must pay the sales tax as soon as they have sent the invoice to the customer.

Whether and when this invoice is paid is completely irrelevant for the tax office. Members of the liberal professions and persons who are exempt from the accounting obligation can choose the actual taxation.

The actual taxation has the great advantage that the sales tax only has to be registered and paid when the customer has actually paid the invoice.

Every entrepreneur is obliged to invoice the customer for sales tax. On the other hand, he can also claim input tax for all purchases or investments that have a clear business connection.

  • The sales tax rate in Germany is 19%. The reduced tax rate of 7% can only be claimed for certain areas such as gastronomy, the hotel industry, media usage and art.

Permanent extension

Any entrepreneur who wishes to do so can apply to their responsible tax office for a permanent extension of the deadline for submitting the advance VAT return.

No justification is required for this request for a permanent extension. If the permanent extension is approved, the pre-registration period is extended by one month.

A permanent extension is also possible with a quarterly payment.

In the case of a monthly permanent extension, however, it would be necessary to make a special advance payment in the amount of 1/11 of the sum of the advance payments of the previous year to the tax office. No advance payment is required for a quarterly permanent period extension.

Small business regulation

The small business regulation can be used by any self-employed or freelance person who has turned over less than 17,500 euros in the last year. No more than 50,000 euros may be achieved in the current calendar year.

The small business rule not only means that there is no need to register sales tax in advance, but also that no sales tax may be shown on invoices to customers. The pros and cons of the small business regulation should in any case be carefully weighed against each other.

On the one hand, the bureaucratic effort is reduced considerably. On the other hand, larger investments could be necessary for which a high input tax is due. Here it would be worth considering whether it might not be better to forego the small business regulation.

Otherwise, the input tax cannot be claimed from the tax office, which can result in the owner of the business losing a lot of money.

Errors in the advance VAT return should be avoided

Entrepreneurs, in particular, often have problems preparing the advance VAT return. This can lead to difficulties, especially if the advance VAT return is submitted once a year.

If you submit the advance VAT return, you must make sure that different tax rates apply to certain products and services.

For example, if 7% is due for books, it is 19% for most other goods and services.

The 19% VAT rate does not apply to all services

However, the 19% VAT rate does not apply to all types of services either. For example, if you are a self-employed person who offers services in which creative personal performance dominates, then only 7% should actually be applied.

The sales tax application decree

In order to clarify whether 7% should be applied to a service, it is advisable to take a look at the sales tax application decree.

Unfortunately, the sales tax application decree is rather opaque for tax laypeople. To actually be sure, you should consult a tax advisor.

Carry out the advance VAT return with the greatest care

The information in the advance VAT return must also be calculated with the greatest care. If there are discrepancies when comparing the monthly VAT return and the annual tax return, this quickly leads to problems.

Especially if the information in the pre-registration is significantly lower. In this case, the tax office is happy to assume that there is an intentional postponement. An on-site tax audit can be the result.

If you come across errors in the advance VAT return, then these should be corrected before submitting the annual VAT return.

Individual references and sources

Federal Ministry for Consumer Protection and Justice: Value Added Tax Act »
Federal Ministry for Consumer Protection and Justice: Taxation of small businesses, §19 Sales Tax Act »

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