Everyone who is self-employed and provides services or supplies that are taxable on turnover (umsatzsteuerbar) usually has to submit an advance VAT return (Umsatzsteuervoranmeldung) electronically to the tax office (Finanzamt). This has to be done on a monthly or quarterly basis. It does not matter whether sales were achieved on a full-time or part-time basis- you will still have to submit the tax returns in the relevant period.
In principle, every self-employed person and entrepreneur is obliged to pay levy sales tax (Umsatzsteuer) on their deliveries and services. If the sales taxes for your business (as a recipient of goods or services) are invoiced by another entrepreneur, you will have to also cover the input tax (Vorsteuer).
The input tax (Vorsteuer) is deducted from the value added tax or VAT (Umsatzsteuer), and the remainder will then be the turnover tax payload (Umsatzsteuer-Zahllast) or the input tax surplus (Vorsteuer-Überschuss). But not every self-employed person (Kleinunternehmer) is affected. Small entrepreneurs who do not generate a lot of sales may be exempted from a VAT return (Umsatzsteuervoranmeldung). In this guide, we will take a closer look at the topic of value added tax returns (Umsatzsteuervoranmeldung).
What is the Sales Tax? (Umsatzsteuer)
Value added tax is an excise duty that is charged on any revenue generated from private and public trade. You should note that individual incomes are not considered when calculating the sales tax. Only the revenue earned by the business will be taken into consideration. This means that sales tax is the same for everyone.
You also have to factor in the input tax deduction. If you are VAT-registered and buy products that already have VAT taxes, you can deduct the tax when you make your settlements with the tax authorities. This allows entrepreneurs to deduct the sales tax amounts (Umsatzsteuer) that have already been levied by other companies.
As a self-employed businessperson, you also have your expenses, including the cost of goods and raw materials. Whenever you make purchases for your business, you will pay VAT at the normal rate. This could be 20% or 5% at the reduced rate. Some expenses such as food and clothing are charged 0% VAT. You will not need to claim profit but can make a refundable input tax payment.
The input taxes may only be deducted from expenses that are necessary for the business to run on a day to day basis. Non-deductible expenses are those that are not necessary for operational purposes, and they include lifestyle expenses and personal fines.
If you are the supplier of the goods that have already been charged VAT taxes (Umsatzsteuer), you will have to send the taxes to the government at the end of the year.
A VAT refund (Umsatzsteuervoranmeldung) will be issued if the output tax is higher than the input tax. The output tax is the amount of money that is charged as VAT on the goods and services you sell from your business. You have to be VAT registered in order to receive the tax refund (Steuererstattung). This amount has to be calculated on sales made to other businesses as well as private consumers. For VAT paid on sales between businesses, the VAT paid has to be specified in a sales document.
To claim a refund on your VAT, you will have to submit a VAT return (Umsatzsteuervoranmeldung) to HM Revenue and Customs in each accounting period. This has to be done every three months. The information you should include in the VAT return records includes your total sales and purchases, the amount of VAT you owe, the amount of VAT you can claim, and the total amount you should get in VAT returns. You should note that you have to submit a VAT return form even if you don’t have any taxes to reclaim or pay.
Sales Tax Advance for Self-Employed and Co. (Umsatzsteuervoranmeldung)
Self-employed people and entrepreneurs make monthly or quarterly tax reports on the VAT (Umsatzsteuer) amounts incurred at the tax office (Finanzamt). They will then send the payments. This happens as part of the VAT advance notification (Umsatzsteuervoranmeldung).
Self-employed people and entrepreneurs are obliged to pay sales tax. According to the sales tax law (§18 UStG), companies have no other choice and must make a pre-notification (Voranmeldung).
In principle, entrepreneurs are subject to VAT from the first day of operation (umsatzsteuerpflichtig). There is one exception, however. If you fail to achieve more than 17,500 Euros in annual turnover, you will be considered a small business (Kleinunternehmer). For small businesses, VAT is not charged on application.
Deduct Sales Revenue (Abführen der Umsatzsteuer)
Sales tax payments (Umsatzsteuerzahlungen) are split into individual partial payments. In doing so, companies have to determine their installments themselves and pay them to the tax office (Finanzamt). In this period the respective transfers will be made as determined by the responsible tax office. The transfers will depend on the turnover tax burden (Umsatzsteuerzahllast) of the previous year.
The sales tax is payable quarterly if the payload in the previous year was between €1,001 and €7,500. If a company has been newly founded, a monthly VAT return (Umsatzsteuervoranmeldung) must be submitted in the year of establishment and the following calendar year. This also affects companies whose turnover tax burden (Umsatzsteuerzahllast) was higher than 7,500 euros.