Advance sales tax return

Definition and legal basis:

The advance VAT return is a provisional tax return that entrepreneurs must regularly submit to the tax office. It is used to calculate and pay VAT on the basis of the sales made and the input tax claimed. The legal basis for the advance VAT return can be found in the German Value Added Tax Act (UStG), in particular in Section 18 UStG, as well as in the German Value Added Tax Implementation Ordinance (UStDV). The advance VAT return is an important instrument for the timely collection of VAT and for ensuring an even tax flow. It enables the tax authorities to generate regular tax revenue without having to wait for the annual tax return. At the same time, it offers entrepreneurs the opportunity to receive a prompt refund of excess input tax.

Obligation to submit and deadlines:

In principle, all entrepreneurs who provide services subject to VAT are obliged to submit advance VAT returns. The frequency of submission depends on the amount of VAT payable in the previous year: 1. Monthly submission: For tax payable of more than EUR 7,500 in the previous year
2. Quarterly levy: For a tax liability between 1,000 and 7,500 euros in the previous year
3. Annual submission: For tax payments of less than EUR 1,000 in the previous year Start-ups must generally submit monthly advance returns in the first two calendar years. The deadline for submitting the advance VAT return and paying the VAT generally ends on the 10th day after the end of the advance return period. Upon request, the tax office can grant a permanent extension of one month, whereby a special advance payment must be made for monthly submissions.

Content and calculation:

The advance VAT return comprises the following main components: 1. taxable transactions: Broken down by tax rates (19%, 7%, 0%)
2. Tax-free sales: e.g. exports or certain medical treatments
3. Input tax amounts: VAT from incoming invoices
4. Special circumstances: e.g. intra-Community acquisitions, reverse charge transactions The VAT payable is the difference between the total VAT on own services and the total deductible input VAT amounts. If the difference is positive, the entrepreneur must pay the amount to the tax office. If the result is negative (input tax surplus), a refund is made by the tax office.

Special features and practical aspects:

1. electronic submission: Advance VAT returns must always be submitted electronically via the ELSTER portal. 2. small business regulation: Small businesses with an annual turnover of up to EUR 22,000 are exempt from submitting advance VAT returns if they make use of this regulation. 3. permanent deadline extension: If a permanent deadline extension is granted, a special advance payment of 1/11 of the sum of the previous year’s advance payments must be made for monthly submissions. 4th correction option: Errors in the advance return can be corrected by means of a corrected advance return. 5. recapitulative statement: A recapitulative statement must also be submitted for intra-Community deliveries and services.

Significance for companies and tax authorities:

The advance VAT return is of great practical importance for companies and the tax authorities: For companies:
– Regular review of the sales and input tax situation
– Liquidity planning through regular payments or refunds
– Early detection of errors in accounting
– Possibility of prompt input tax refunds For the tax authorities:
– Ensuring a continuous tax flow
– Possibility for timely control of sales tax
– Reduction of the risk of tax defaults
– Basis for risk analyses and tax audits

Challenges and current developments:

The advance VAT return presents companies with various challenges: 1. complexity: the correct recording of all relevant sales and input tax requires a deep understanding of VAT law. 2. time pressure: the short submission deadlines require efficient organization of accounting. 3. digitization: The obligation to submit electronically requires the appropriate technical infrastructure and know-how. 4. international circumstances: Additional regulations must be observed for cross-border transactions. Current developments include:
– Discussions about a possible extension of the submission deadlines
– Efforts to further digitalize and automate the reporting process
– Adjustments to new business models, especially in e-commerce
– Measures to combat VAT fraud, e.g. through extended reporting obligations In summary, the advance VAT return is a central element of the VAT system that is of great importance to both companies and the tax authorities. It requires companies to keep careful and timely accounts and have a good understanding of VAT law. The correct and timely preparation of advance VAT returns remains an important task in the context of companies’ tax compliance.