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?
  
• What rules apply to one-time advance payments?
  

What is a deadline extension?

In Germany, businesses must submit an advance VAT return monthly or quarterly by the 10th of the following month. So owners have 10 days to sort their invoices and receipts to calculate the relevant VAT for the period (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 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 (VAT Act).

Businesses can also apply for this deadline to be extended permanently. But this extension has no impact on the annual tax return. Whether or not they apply for an extension, businesses will pay the same amount of VAT per 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 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 monthly can, when claiming the deadline extension, wait until March 10 instead of February 10 to file their return for January.

Who can apply for a deadline extension?

Any business in Germany compelled 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 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 euros 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 tax office has jurisdiction for the applicant’s business. The application must be submitted to this office.
  
• The application must be filed electronically and meet the principles of the regulation governing the transfer of tax data (StDÜV).
  

How do you apply for a deadline extension for VAT?

Businesses that pay VAT quarterly need to apply to their tax office for a deadline extension only once, whereas businesses that pay VAT monthly must reapply each year. In the latter case, businesses also need to make a one-time 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 January 1, 2011, applying for a deadline extension and registering the one-time advance payment are both affected electronically in accordance with the VAT application decree (UStAE); in other words, they are submitted online (Section 18.4 (2) UStAE). To avoid unreasonable impairments—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 preprinted form USt1H. A business may also submit its advance VAT returns in paper form 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-time advance payment is then calculated automatically on the basis of the amounts indicated by the ELSTER program.

Typically, a business’s tax advisers take responsibility for applying for the deadline extension, calculating the one-time 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 the application will be approved by the relevant tax office. This is because, typically, tax offices reject such applications only in cases in which 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 of such decisions are issued. Unless the tax office specifically rejects the application, then it is deemed approved. This means 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 and instead comes into force only from the time 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 approved and remain effective until revoked by the tax office or the business. The deadline extension also applies to the following calendar years—for as long as it is not 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 February 10 of that year. Businesses that pay quarterly must submit their application for a deadline extension for the full calendar year by April 10 of the year in question.

The above notwithstanding, businesses can apply for a deadline extension at any time—i.e., 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 take effect from July 2023. To do this, you must apply by August 10, 2023. After the application, your advance payment will not need to be made by August 10, 2023, but instead by September 10, 2023.

Example for businesses paying quarterly

Your business pays its advance VAT quarterly and you want a deadline extension to take effect from the fourth quarter of 2023. To do this, you must apply by January 10, 2024. After the application, your advance payment will not need to be made by January 10, 2024, but instead by February 10, 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 monthly or quarterly, 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-time advance payment. Although the deadline extension does not need to be reapplied for each year, the one-time 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 February 10 (Section 18.4 (3) Sentence 1 UStAE).

For businesses paying quarterly

Businesses that pay VAT quarterly do not need to pay a one-time advance payment. However, businesses that pay quarterly are granted an extension of only one month, not a whole quarter. This means, for example, that the VAT for the first quarter of a year must be declared by May 10 rather than April 10.

Can you switch from monthly to quarterly payments for VAT?

A business paying VAT quarterly has advantages over one paying monthly in connection with the deadline extension; for example, it does not need to make the one-time advance payment. So it is important for each business 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 the business records and the relevant level of VAT 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 for its first year. If the annual VAT liability is higher than 7,500 euros, the business must continue to file its advance VAT return monthly. If at the end of the second year the business has paid less than 7,500 euros in VAT, it can switch from monthly to quarterly payments for its third year. Incidentally, businesses with annual VAT of less than 1,000 euros can submit their VAT returns yearly.

What rules apply to one-time advance payments?

The one-time advance payment is calculated based on the last month of the relevant year (i.e., December). In the case of businesses in their first year, the amount of this one-time advance payment will be estimated by the tax office based on the information the business has provided on its provisional annual sales.

Unless the deadline extension is revoked, the one-time advance payment must be paid by February 10 of the following calendar year. If the one-time 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.