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- The advance VAT return is a provisional tax return that must be submitted to the tax office on a regular basis.
- The legal basis is the Value Added Tax Act (Section 18 UStG) and the Value Added Tax Implementation Ordinance (UStDV).
- The frequency of the levy depends on the amount of VAT payable in the previous year.
- Small businesses are exempt from the tax up to an annual turnover of 22,000 euros.
- The advance return contains taxable sales and input tax amounts that must be recorded correctly.
- Electronic transmission takes place via the ELSTER portal, which requires technical infrastructure.
- Current developments relate to digitalization and VAT fraud as well as adapting to new business models.
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 Value Added Tax Act (UStG), in particular in Section 18 UStG, as well as in the 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 levy: For a tax payment of more than 7,500 euros in the previous year
2. Quarterly levy: For a tax payment of between 1,000 and 7,500 euros in the previous year
3. Annual levy: For a tax payment of less than 1,000 euros 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 sales tax to be paid is the difference between the total sales tax on own services and the total of deductible input tax 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 transmission: In principle, advance VAT returns must be transmitted 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 an advance VAT return if they make use of this regulation.
3. permanent extension: If a permanent extension is granted, a special advance payment amounting to 1/11 of the total of the previous year’s advance payments must be made for monthly tax returns.
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 accounting errors
– Possibility of prompt input tax refunds
For the tax authorities:
– Ensuring a continuous tax flow
– Possibility for timely control of sales taxation
– 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 taxes requires a deep understanding of VAT law.
2. time pressure: The short deadlines require efficient organization of accounting.
3. digitization: The obligation to submit documents electronically requires the appropriate technical infrastructure and know-how.
4. international circumstances: Additional regulations must be observed for cross-border transactions.
Current developments include the following:
– Discussions about a possible extension of the filing deadlines
– Efforts to further digitalize and automate the reporting process
– Adjustments to new business models, particularly 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.
