Annual VAT Return refers to the annual tax return by which entrepreneurs present to the tax office their sales, the VAT attributable to those sales (VAT) and the deductible input VAT. It is based on the provisions of the German VAT Act (UStG) and is required for the final assessment of VAT for the relevant calendar year.
Duties and Deadlines
Every entrepreneur who does not fall under the small entrepreneur regulation (§19 UStG) must file a VAT return. In addition to the annual return, VAT advance returns (UStVA) are required in many cases.
- Advance return periods: The obligation to file monthly, quarterly or annually depends on the amount of VAT payable in the previous year. Common guidance: >7,500 EUR → monthly, ≤7,500 EUR → quarterly, ≤1,000 EUR → no advance returns (annual return only).
- Deadlines: The regular submission deadline for the annual VAT return is typically 31 July of the year following the assessment year. If a tax advisor is engaged, the deadline is often extended, frequently until the end of February of the second year following the assessment year. Electronic submission is mandatory via ELSTER.
Calculation and Accounting Treatment
The VAT return compares output VAT collected (or generally accrued VAT) with deductible input VAT. The difference results in the VAT payable or the refund due.
Basic principle
In bookkeeping you post output VAT (from your sales invoices) to an output VAT account and input VAT (from purchase invoices) to an input VAT account. At year‑end or with each advance return these accounts are offset.
Practical example
You issue invoices in a month for net 10,000 EUR with 19% VAT (1,900 EUR). Incoming invoices for operating expenses contain input VAT of 500 EUR. In the VAT return or advance return this results in a VAT liability of 1,400 EUR (1,900 − 500). This amount must be paid to the tax office or is taken into account in the annual reconciliation.
Special Situations
VAT practice includes numerous special cases that must be considered in the return:
- Small entrepreneurs: Under §19 UStG entrepreneurs with low turnover can be exempt from VAT. They issue net invoices without VAT and are not required to remit VAT; however, filing an annual return can still be necessary in certain cases, for example when claiming input VAT refunds.
- Reverse charge and intra‑Community supplies: For certain services and cross‑border transactions the tax liability is shifted to the recipient. Such transactions must be correctly reported in the VAT return and, where applicable, in recapitulative statements (Zusammenfassende Meldungen).
- Invoicing requirements: For the input VAT deduction incoming invoices must contain the statutory information required by §14 UStG (e.g. tax number, VAT amount, time of supply). Missing details can lead to the loss of the input VAT deduction.
Practical Tips for Bookkeeping
A clean and timely VAT return reduces additional assessments, interest and late-payment penalties. Observe the following points:
- Regular account reconciliation: Reconcile output VAT and input VAT accounts monthly to avoid surprises at year‑end.
- Record vouchers systematically: Scan and digitise incoming invoices promptly and check invoice facts for correct VAT information.
- Use ELSTER: File advance returns and the annual return electronically via ELSTER; many accounting programs support direct submission.
- Corrections: If you discover errors, you can usually correct them by submitting an amended VAT advance return or by making corrections in the annual return. For larger errors inform your tax office or tax advisor promptly.
- Tax advice: For cross‑border transactions, reverse‑charge cases or the use of special schemes (e.g. margin scheme) consultation with a tax advisor is recommended.
The VAT return is a central element of a company’s tax obligations in Germany. For freelancers and small businesses ongoing, careful bookkeeping and, where appropriate, cooperation with a tax advisor are advisable to avoid formal errors and unnecessary additional payments.