Turnover 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 as part of a business,
- the import 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).
Basis of assessment and tax rate
The basis of assessment is normally the net price, on which the turnover tax is added. If a gross price (i.e. the turnover tax is already included) has been agreed, the turnover tax must be deducted.
In Germany there are the following tax rates:
- The general tax rate of 19 %, to which most sales are subject,
- the reduced tax rate of 7 %. This applies in particular to transactions for basic human needs (e.g. most foodstuffs, books, newspapers, cultural events, journeys on local public transport) as well as
- the tax rate of 0 % for certain transactions in connection with photovoltaic systems (so-called zero tax rate). This was introduced as of 01.01.2023.
For restaurant and catering services (except for the supply of beverages), the reduced VAT rate of 7% applies for a limited period until 31.12.2023.
The tax office from whose district the business is wholly or predominantly operated.
German turnover tax is levied on all services rendered in Germany against payment within the framework of a business. According to the definition in Section 2 (1) of the Value Added Tax Act, you are an entrepreneur if you carry out a commercial or professional activity independently. 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 UStG) or if a tax exemption applies to the respective turnover carried out.
A commercial or professional activity is any activity that is intended to generate income on a permanent basis.
Accordingly, the ability to be an entrepreneur is possessed by all
- natural persons (individuals who run a business within the meaning of the UStG, e.g. retailers, craftsmen, landlords),
- 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 companies 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 purchased services in return.
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 VAT 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 anticipated tax in the year of establishment. The aforementioned amount limits apply here. Based on the expected tax, it is determined whether you have to submit advance tax returns monthly or quarterly. An exemption from the submission of advance returns is not possible for newly established companies.
- 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 tax calculated by yourself. 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 returns and for paying the advance payments by one month. If you wish to make use of a standing deadline extension for the submission of the current advance VAT returns, you must first apply to the tax office for this. The deadline extension can be claimed if the tax office does not reject your application. A separate notice of approval will not be issued. The extension is valid until you no longer wish to make use of it or the tax office revokes it.
In the case of monthly submission, the granting of this extension is dependent on a special advance payment being made. In the case of quarterly submission, you do not have to make a special advance payment.
In the case of monthly submission, you must declare and pay the special advance payment by the 10th of the month following the month for which the extension is to apply for the first time. During its period of validity, the special advance payment must be declared and paid annually by 10 February
Obligation to authenticated electronic transmission
You must transmit the advance return for VAT, the application for extension of the standing period 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.
- VAT return:
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 2022 until 02.11.2023 at the latest. If you enlist the help of a tax advisor and this person prepares the return, the deadline is extended to 31.07.2024. Different deadlines apply to the agricultural and forestry sector.
- Advance VAT return:
No later than the 10th day after the end of the advance return period (month/quarter). In the case of a permanent deadline extension, this deadline is postponed by one month.
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 Economics 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.
21.07.2023 Oberfinanzdirektion Karlsruhe als Vetreterin des Finanzministeriums Baden-Württemberg