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Taxes and bookkeeping for service providers with their own UG or GmbH
Selling expertise and time rather than goods? Your bookkeeping may be manageable, but the details matter: correct invoices, VAT timing and sound records for travel and business meals.
Typical tax topics for service businesses
1. Cash or accrual VAT accounting
By default, VAT becomes due when you provide your service, even if the customer has not paid: accrual VAT accounting. If prior-year turnover is below €800,000, you can apply to the Finanzamt (tax office) for cash VAT accounting. You then pay VAT only when you receive payment, helping your cash flow.
2. Invoices the tax office accepts
A valid invoice needs, among other details, your tax number or VAT ID, a sequential invoice number, the service period and the VAT amount. Missing details can prevent your customer from deducting input VAT, or prevent you from doing so on purchase invoices.
3. Electronic invoicing
Since 2025, you must be able to receive electronic business invoices. From 2027, businesses with prior-year turnover above €800,000 must issue them; from 2028, the requirement extends to other businesses, subject to statutory exceptions.
4. Travel and business meals
Client travel, hotels and business meals are business expenses. You can deduct 70% of reasonable business meal costs and the full eligible input VAT. Gifts to business partners are deductible up to €50 per person per year.
5. EU business clients
You invoice business clients in other EU countries without German VAT and report the sales in your recapitulative statement.
Bookkeeping, duties and deadlines
Bookkeeping: A UG (entrepreneurial company) or GmbH (limited liability company) is a commercial entity by legal form. You must keep double-entry books under the German Commercial Code (HGB) and prepare a Jahresabschluss (annual financial statements) each year, comprising a balance sheet, profit and loss account and notes. Micro-entities may omit the notes.
Annual financial statements: For small companies, you have up to six months after the financial year ends to prepare the statements. You must disclose them in the Unternehmensregister (company register) within twelve months of year-end. You submit them electronically to the Finanzamt (tax office) as an E-Bilanz (electronic tax balance sheet).
Annual tax returns (you file by 31 July of the following year if filing without a tax advisor):
- Corporation tax return: 15% of profit plus a solidarity surcharge of 5.5% on that tax
- Gewerbesteuer (trade tax) return: based on your municipality’s assessment multiplier
- Annual VAT return
- Investment income withholding tax notification if your company distributes profits
Ongoing: You file advance VAT returns monthly or quarterly, depending on the previous year’s VAT, by the 10th of the following month (one month later with a permanent filing extension). Corporation tax prepayments fall due on 10 March, June, September and December; trade tax prepayments on 15 February, May, August and November.
Record retention: Keep supporting documents such as invoices and bank statements for eight years, and books and annual financial statements for ten years.
You can manage your bookkeeping, prepare annual financial statements and create tax returns in Pluto. Employee payroll, non-standard international matters, tax groups, transformations and tax audits are outside its scope.
Frequently asked questions
Can my GmbH use cash VAT accounting?+
Yes, if total prior-year turnover did not exceed €800,000. You apply to the Finanzamt (tax office).
How much of a business meal can I deduct?+
70% of reasonable costs as a business expense, plus the full eligible input VAT. You need a proper business meal receipt.
Do I need to issue electronic invoices yet?+
You must be able to receive them since 2025. Issuing becomes mandatory from 2027 if prior-year turnover exceeded €800,000, otherwise from 2028, subject to statutory exceptions.
Do I need a tax advisor?+
You remain responsible for your company’s bookkeeping, Jahresabschluss (annual financial statements) and tax returns. A tax advisor can help with complex matters such as restructuring or tax audits.
Pluto Tax is a software tool that supports you in preparing your own tax returns. It does not provide tax advice within the meaning of the German Tax Advisory Act.
Updated: October 2026