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|
||exemption from turnover tax|
|Kleinunternehmerregelung||Small Business Regulation|
|Umsatz||Sales/ Revenue/ Turnover|
|Sondervorauszahlung||Special advance payment|
|Säumniszuschläge||Late payment fines|
||Input tax surplus|
1) 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.
2) 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.
3) 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 documents and keep them for ten years.
In short: VAT earned – 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.
4) 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–
4.1) 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.
4.2) 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 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.
5) 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 your reports. If you file the advance VAT return too late or do not pay on time, the tax office is entitled to levy late payment fines.
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 €. In some cases, it could lead to an audit by tax authorities.
You can avoid all this hassle by using an accounting tool and submit your advance VAT return easily, conveniently and correctly without any errors.
6) How do you report advance VAT return to Finanzamt
The advance VAT can only be reported online. 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 with ELSTER: 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 a few clicks: A much quicker and easier way is to submit it through a dedicated software for freelancers such as Sorted. With a tool like Sorted, you can create the advance return for VAT in English and file it directly to your local Finanzamt.
Let’s take a detailed look at both methods.
6.1) 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.
One caveat of this method is that you must log in to Elster Online every month for the submission of the VAT return using an 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 and complicated system, which only adds to more paperwork, stress, time 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.
6.2) Submitting advance VAT return through a tax filing tool
You can make it even easier for yourself to submit your VAT return with just a few clicks directly from a dedicated tax filling tool for freelancers such as Sorted!
Based on your income and expenses, Sorted automatically prepares your VAT report for the tax office. This way you can create and send your VAT return within minutes in just a few clicks.
You don’t even need an ELSTER certificate for this – Sorted sends the VAT reports directly to the tax office. In addition, you can manage all your invoices and expenses in one place and have an overview of your business finances at all times.
The UI of Sorted uses very simple English which makes it extremely helpful for expat freelancers who are uncomfortable with complicated legal or finance german terminologies.