Are you a freelancer in Germany and charge VAT to your clients? Read this post to learn how to submit advance VAT return (Umsatzsteuervoranmeldung) in Germany.
Umsatzsteuervoranmeldung AKA advance VAT return may sound complicated or even intimidating at first. But once you understand its nitty-gritty you will be able to deal with it – like a pro that you are 😉
Submitting advance VAT return, or Umsatzsteuervoranmeldung or UStVA for short is actually quite simple.
By the end of this article, you would have learned the most important facts about how advance VAT return works and the easiest way to file it.
But first here are some commonly used German terms in this post and their English translations.
|Umsatzsteuervoranmeldung (UStVA)||Advance VAT return|
|Umsatzsteuerbefreiung||exemption from turnover tax|
|Kleinunternehmerregelung||Small Business Regulation|
|Umsatz||Sales/ Revenue/ Turnover|
|Sondervorauszahlung||Special advance payment|
|Säumniszuschläge||Late payment fines|
|Vorsteuerüberhang||Input tax surplus|
What is advance VAT return AKA Umsatzsteuervoranmeldung (UStVA)?
As a registered freelancer in Germany, you are obliged to report VAT to Finanzamt from day one of your business. Therefore, you should get a thorough understanding of advance return for VAT as early as possible!
By filing an advance return for VAT, you are, so to speak, making an advance payment of VAT to the tax office.
Since advance VAT return payments to Finanzamt are distributed throughout the year, your tax burden is spread out evenly. This prevents freelancers in Germany from paying a large lump sum payment at the end of the year.
Who must submit an advance VAT return in Germany?
Anyone who carries out a commercial or freelance activity in Germany must regularly submit an advance VAT return to the tax office.
There are three exceptions to this:
- Freelancers who are registered under small business regulation (Kleinunternehmerregelung). All self-employed persons who earn a turnover of no more than 22,000 euros in the previous year and do not exceed 50,000 euros in the current year are considered small businesses. Freelancers can also make use of this sales tax exemption if their turnover is below the defined turnover limit.
- Certain professional groups such as doctors, dentists, physiotherapists or insurance brokers are also exempt from sales tax and therefore do not have to submit an advance sales tax return.
- If your VAT liability was less than 1,000 euros in the previous year, you can be exempted from filing an advance turnover tax return after consulting the tax office. In this case, you only have to submit a VAT return once a year.
How is the advance VAT return calculated?
Most freelancers in Germany charge 19% VAT. A reduced rate of 7 % applies to certain types of services, such as creative work.
If you are not registered as a ‘Kleinunternehmer‘ then you are obliged to charge your customers 19% VAT. You must clearly specify VAT in every invoice to send to your clients.
In addition to your income, as a freelancer, you may have business expenses on which you pay VAT. This is called input tax (vorsteuer). It is important that the VAT is explicitly shown on the invoices you pay. You must collect these receipts and keep them for ten years.
In short: VAT charged – VAT spent = VAT to be paid to the Finanzamt.
If there is a negative value, a so-called input tax surplus, you will be reimbursed by the tax office.
What is the deadline for submitting advance VAT return?
The advance VAT return must be submitted either once a month or once a quarter. The key date is always the 10th of the following month. If you give the tax office a direct debit authorisation (SEPA–
Monthly advance VAT return
The monthly advance VAT return is always mandatory in the first two years of a business start-up. The exception to this is again small businesses that are not subject to VAT.
The advance VAT return must be submitted to the tax office by the 10th day of the following month.
For example, the advance return for tax on sales/purchases for January must be submitted by 10 February.
If you have to submit your UStVA on a monthly basis, you will have to make a special advance payment to the tax office when applying for an extension (dauerfristverlängerung). The amount of the special advance payment is one-eleventh of the VAT payable in the previous year.
If you did not have to pay VAT to the tax office in the previous year – because you paid more input tax than you collected VAT – you do not have to make any special advance payments.
You can offset the special advance payments against the VAT at the end of the fiscal year so that the permanent extension of the deadline does not result in you paying more.
Quarterly advance VAT return
Anyone who has a tax liability of between 1,001 and 7,500 euros and has been making a regular monthly advance return for VAT for two years now only has to submit his advance return four times a year instead of twelve.
The filing and payment date is then the 10th day after the end of the quarter, for example, April 10 for the first quarter of a year. However, to submit the advance return for tax on sales/purchases quarterly, you need the express written permission of the tax office.
Sidenote: If 10 days deadline is too short for you, you can apply for a permanent extension. This always gives you one month more time to fill out the UStVA forms and pay the VAT within the deadline.
How do you report advance VAT return to Finanzamt
The advance VAT can only be reported online at this time. The submission in paper form is only permitted in exceptional cases and upon special requests.
You have TWO options for submitting your advance VAT return in Germany
- Do it manually: Either you go through all your income and expenditure for the advance return period, calculate the VAT collected and spent and enter all the figures manually, field by field, on the advance VAT return form in Elster Online.
- Do it automatically with just one click: A much quicker and easier way is to enter your income and expenditure in invoicing tools. With an invoicing tool, you can create the advance return for VAT. No more manual filling out.
Submitting Advance VAT return through ELSTER
You are obliged to submit your advance VAT return electronically to your tax office. As described above, you can do this via Elster Online portal, where you can complete the advance VAT return form.
This form is about two pages long (and in German). It takes only a few minutes to fill it out, and the data is transmitted super-fast. You can do file a return by downloading the free ELSTER tax return software to submit your advance VAT return.
For this, you will also need an electronic certificate, which you can order via the ElsterOnline portal. This certificate functions as a digital signature and guarantees the authenticity of your tax data.
What is the Elster certificate?
If you want to use Elster to send reports such as the advance VAT return to the tax office, you need online access to the Elster portal. To activate this Elster online access, you must first generate an Elster certificate and wait for the activation code to be sent by post. You will, therefore, have to allow for a longer period of time in the Elster registration process.
One caveat of this method is that you must log in to Elster Online every month for the submission of the VAT return using the authentication process. For this authentication, you must create and download an Elster certificate file during registration and then wait for a letter with the activation code.
This may take two to three weeks. A very silly system, which only adds to more paperwork, stress and admin work.
The good news is that it is also possible to submit an advance VAT return without requesting an Elster certificate and authentication every time.
Submitting advance VAT return through an invoicing program
You make it even easier for yourself if you send your VAT return with just a few clicks directly from your invoicing program!
Based on your invoices and receipts, the online accounting program automatically fills in your VAT forms for the tax office. This way you can create and send your VAT return within a few seconds with just a few clicks.
You don’t even need an Elster certificate – you can send the VAT return directly from the invoicing program to the tax office.
All the figures from your accounts are automatically entered correctly in the VAT return. You don’t even have to log in to Elster Online – and you save a lot of time and work.
In addition, you can manage all your invoices and expenses in one place and have an overview of your company finances at all times.
What happens if you don’t submit advance VAT return on time
Sure, VAT advance return is a pain in the ass. But like with so many things in life – once you get started, it becomes a routine. However, don’t wait too long to submit. If you file the advance VAT return too late or do not pay on time, the tax office is entitled to levy late payment surcharges.
This surcharge depends on various factors (how long the delay is, how often you have missed the deadline and the discretion of the tax officer) – but it may not exceed 10% of the tax amount declared and 25,000 €.
If your UStVA documents do not match the information in your annual tax return, this can lead to an unpleasant tax audit. If you’re short of money, you should still file your advance return and ask the tax office to defer payments.
You can avoid all the hardships by using an affordable accounting tool and submit your advance VAT return easily, conveniently and correctly without an Elster certificate.
Read my round-up of the best accounting and invoicing tools in Germany – that you can easily use in English and automate your accounting including the advance VAT return.