VAT Return Basics – 5 Important Questions and Answers

Business owners are subject to VAT from the very first day of their commercial activity. An exception applies to entrepreneurs who make use of the small-business (Kleinunternehmer) scheme. As part of their VAT obligations, business owners must submit a VAT return at regular intervals — either monthly or quarterly. This return records the turnover and input tax amounts of the business for a specific period. The calculated amounts are remitted by businesses to the tax office.

As a rule, business owners must submit a VAT return to the tax office once a month. The filing deadline is the 10th day of the following month — for example, the deadline for the January VAT return is 10 February.

It is also possible to submit the VAT return on a quarterly basis, provided certain conditions are met. Where quarterly filing is permitted, the deadline is the 10th day of the second month following the end of the quarter.

If the filing deadline falls on a weekend or a public holiday, the deadline is moved to the next working day. It is also possible to apply for an extension of the deadline if there are valid reasons that prevent timely submission.

Missing the filing deadline can result in severe penalties. A late VAT return may attract late-payment interest or even fines. In addition, the tax office is entitled to make estimates in order to calculate the tax due — and these estimates may, of course, exceed the amounts actually payable.

VAT is calculated on the net value of a good or service and is shown as a percentage of the gross value, most commonly referred to as Mehrwertsteuer (value added tax). The percentage can vary. The standard rate in Germany is 19% VAT. Some goods and services — such as books and certain foodstuffs — fall under the reduced VAT rate of 7%. Other goods and services are entirely exempt from VAT.

The VAT collected by businesses and passed on to consumers as part of the purchase price must ultimately be remitted to the tax office. The VAT paid by businesses on their own purchases can be reclaimed as input tax, which can have a positive effect on the company's finances and liquidity.

[The correct VAT return](https://www.lexware.de/wissen/buchhaltung-finanzen/umsatzsteuervoranmeldung/) is closely linked to bookkeeping. This is because VAT is calculated on the turnover recorded in the accounts. This means that the accurate recording of business transactions in the books is, not least, what ensures that VAT is correctly determined and posted.

Anyone offering products or services across borders must take a number of special rules into account in order to calculate and ultimately remit VAT correctly. In B2C transactions — i.e. the sale of products and services to a private consumer abroad — VAT is calculated in the same way as for a domestic customer. B2B transactions are treated differently. As a general principle, the place to which a supply or service is delivered also determines the applicable VAT rules. For deliveries to businesses in another EU member state, the reverse-charge mechanism applies. This means that the buyer must calculate and remit the VAT itself. For deliveries to countries outside the EU, different rules apply.

To put it briefly: although the VAT return (Umsatzsteuervoranmeldung) and the annual VAT return (Umsatzsteuererklärung) are closely related, they are two separate processes subject to different formalities. The annual VAT return is filed only once a year. It effectively summarises all the VAT returns submitted during the previous year and provides additional information — for example on tax exemptions and correcting entries. The annual VAT return then determines the VAT actually due, along with any associated refunds or additional payments.