Every business in Germany must comply with a statutory deadline when submitting advance value-added tax (VAT) returns. However, most businesses can extend this deadline. Below, we explain what the requirements for a deadline extension are, how to apply and what benefits it offers.
What's in this article?
- What is a deadline extension?
- What effect does a deadline extension have on advance VAT returns?
- Who can apply for a deadline extension?
- How do you apply for a deadline extension for VAT?
- What are the deadlines for applications?
- What features does the deadline extension have for monthly and quarterly payments?
- Which rules apply to one-off advance payments?
What is a deadline extension?
In Germany, businesses must submit an advance VAT return on a monthly or quarterly basis, by the 10th of the following month. This means that owners have ten days to sort through their invoices and receipts, calculate the relevant VAT for the period in question (a month or a quarter) and submit their return to the tax office. If they miss the deadline, they may be subject to late-payment fees, as charged by the tax office. The legislature has, however, made it possible for the deadlines for submitting advance VAT returns – and making the relevant payments – to be extended by a month. This option is regulated in Section 18 (6) UStG (German VAT Act).
Businesses can also apply for this deadline to be extended permanently. However, this extension does not have any effect on the annual tax return. Whether or not they apply for an extension, businesses will pay the same amount of VAT each year.
What effect does a deadline extension have on advance VAT returns?
The deadline extension offers businesses in Germany the option of submitting advance VAT returns a month later. This means that the VAT due for the previous month or quarter does not need to be paid until later – thus reducing the time pressure on the accounts department. Above all, the deadline extension provides financial relief, especially for startups and smaller businesses, and protects liquidity.
For example, businesses that submit their advance VAT return on a monthly basis can, when claiming the deadline extension, wait until 10 March instead of 10 February to file their return for January.
Who can apply for a deadline extension?
Any business in Germany that is obliged to file advance VAT returns can apply for a deadline extension – in other words, all businesses, self-employed people and freelance professionals.
Self-employed people who are taxed under the small-business rule are excluded because they do not pay VAT. Similarly, businesses whose VAT liability for the previous year fell below €1,000 are exempt and do not need to apply for a deadline extension.
What prerequisites must be met by those applying for a deadline extension?
When applying for a deadline extension, the following requirements must be met:
- It must be clear which German tax office has jurisdiction for the applicant's business. The application must be submitted to this office.
- The application must be filed electronically and must meet the principles of the German regulation governing the transfer of tax data (StDÜV).
How do you apply for a deadline extension for VAT?
Businesses that pay VAT on a quarterly basis only need to apply to their tax office for a deadline extension once, whereas businesses that pay VAT monthly must reapply each year. In the latter case, businesses also need to make a one-off advance payment corresponding to one-eleventh of their VAT liability for the previous year. No justification needs to be provided for applying for a VAT deadline extension.
Electronic data transfer
The deadline extension can be applied for online via ELSTER, the online tax office for businesses in Germany. Since 1 January 2011, applying for a deadline extension and registering the one-off advance payment have both been completed electronically in accordance with the German VAT application decree (UStAE); in other words, they are submitted online (Section 18.4 (2) UStAE). To avoid unreasonable impairments – whether personal or financial – the tax office can waive the requirement for electronic transfer (Section 18.1 (1) UStAE). In such cases, the relevant business must submit its application for a deadline extension using the official pre-printed form: USt1H. A business may also submit its advance VAT returns in paper format if a corresponding application to do so is approved by the tax office.
When filling in the online application for a deadline extension using the tax office's ELSTER portal, a business must state the expected VAT for the calendar year. Businesses applying for the deadline extension for the first time can use the VAT paid the previous year as a guide. Startups must estimate their expected annual VAT liability when applying for the deadline extension for their first year of operation. The mandatory one-off advance payment is then calculated automatically on the basis of the amounts indicated by the ELSTER programme.
Typically, a business's tax advisers take responsibility for applying for the deadline extension, calculating the one-off advance payment and notifying the business of the relevant deadlines from the extension in good time. Using ELSTER, a business can also submit basic information about its annual sales itself.
Approval of a deadline extension application
When a business submits an application for the deadline extension, it is assumed that the application will be approved by the relevant tax office. This is because, typically, tax offices only reject such applications in cases where the business has exercised poor conduct – for example, paying taxes late or not at all. In all other cases, the tax office will approve applications. However, no notifications are issued for such decisions. Unless the tax office specifically rejects the application, then it is deemed to be approved. This means that a business can use the deadline extension as soon as its application has been received by the tax office.
Applications for a deadline extension are more or less a formality and can be made at any time. However, the extension does not apply retrospectively – it only comes into force when the application is filed. Nevertheless, businesses must observe certain deadlines to be able to use the deadline extension immediately after submitting their application.
How long does the deadline extension apply for?
Unless explicitly refused, deadline extensions are deemed to be approved and remain effective until revoked by either the tax office or the business. The deadline extension also applies to the subsequent calendar years, unless it is revoked (Section 18.4 (3) Sentence 1 UStAE).
What are the deadlines for applications?
A business that pays VAT monthly and wants to apply for a deadline extension for the full calendar year must do so by 10 February of that year. Businesses that pay quarterly must submit their application for a deadline extension for the full calendar year by 10 April of the year in question.
The above notwithstanding, businesses can apply for a deadline extension at any time – even during a calendar year. According to statutory regulation (Section 18 (1) and 2a UstG), the business must apply for the deadline extension by the time the first advance return affected by the deadline extension is due to be submitted.
Example for businesses paying monthly
Your business pays its advance VAT monthly and you want a deadline extension to come into effect from July 2023. To do this, you must apply by 10 August 2023. Once the application has been submitted, your advance payment will not need to be made by 10 August 2023, but instead by 10 September 2023.
Example for businesses paying quarterly
Your business pays its advance VAT quarterly and you want a deadline extension to come into effect from the fourth quarter of 2023. To do this, you must apply by 10 January 2024. Once the application has been submitted, your advance payment will not need to be made by 10 January 2024, but instead by 10 February 2024.
What features does the deadline extension have for monthly and quarterly payments?
Depending on whether a business needs to submit its advance VAT returns on a monthly or quarterly basis, the conditions under which a deadline extension can be used also differ.
For businesses paying monthly
Businesses that declare and pay VAT monthly must pay one-eleventh of their annual VAT in a one-off advance payment. Although the deadline extension does not need to be reapplied for each year, the one-off advance payment does need to be paid for each calendar year to which the deadline extension applies, and it must be calculated, declared and paid by 10 February (Section 18.4 (3) Sentence 1 UStAE).
For businesses paying quarterly
Businesses that pay VAT quarterly do not need to pay a one-off advance payment. However, businesses that pay quarterly are only granted an extension of one month, not a whole quarter. This means, for example, that the VAT for the first quarter of a year must be declared by 10 May rather than 10 April.
Can you switch from monthly to quarterly payments for VAT?
A business that pays VAT quarterly has advantages over one paying monthly in connection with the deadline extension. For example, it does not need to make the one-off advance payment. As a result, it is important for individual businesses to be familiar with the conditions for switching from monthly to quarterly payments.
Typically, a business is classed by the tax office as paying monthly or quarterly. It depends on the amount of sales that the business records and the relevant level of VAT that it has paid in previous years. In the first year, every business must report its VAT monthly. It is only from the third year of operation that switching to quarterly payments is possible, once the tax office is aware of the business's annual sales from its first year. If the annual VAT liability is higher than €7,500, the business must continue to file its advance VAT return on a monthly basis. If at the end of the second year, the business has paid less than €7,500 in VAT, it can switch from monthly to quarterly payments for its third year. Incidentally, businesses that pay less than €1,000 a year can submit their VAT returns annually.
What rules apply to one-off advance payments?
The one-off advance payment is calculated based on the last month of the relevant year (i.e. December). For businesses in their first year, the amount of this one-off advance payment will be estimated by the tax office based on the information that the business has provided on its provisional annual sales.
Unless the deadline extension is revoked, the one-off advance payment must be paid by 10 February of the following calendar year. If the one-off payment is made too late, the tax office can apply a late-payment charge. The same applies each time an advance VAT return is filed late.
Read additional articles regarding payments and learn about the benefits available to businesses in Germany. To take advantage of our offers for advancement, contact the Stripe Sales team.