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Taxes and bookkeeping for recruitment agencies, headhunters and hr consultancies
Headhunting, recruitment or HR consulting: your business runs on placement fees, retainers and consulting hours.
Typical tax topics for HR businesses
1. Placement fees and retainers
Success fees, retainers and interim payments are subject to VAT. For advances such as retainers, VAT arises when you receive payment, not only when you fill the role.
2. Refunds when candidates leave during probation
Many placement agreements provide for a partial refund if the candidate leaves during probation. You correct revenue and VAT in the month in which you agree the refund.
3. Job ads and recruitment tools
LinkedIn Recruiter, Indeed job listings and Meta ads: many invoices come from other EU countries without German VAT and are subject to reverse charge.
4. Cash VAT accounting for long payment terms
Large clients often pay after 30 or 60 days. If prior-year turnover is below €800,000, you can apply for cash VAT accounting and pay VAT only once you receive payment.
5. EU business clients
When recruiting for businesses in other EU countries, you invoice 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
When do I pay VAT on a retainer?+
Under accrual VAT accounting, when you receive the advance. Under cash VAT accounting, receipt of payment is also the trigger. VAT does not wait until you fill the role.
What if I have to refund a placement fee?+
You correct revenue and VAT in the month in which you agree the refund.
Can I serve clients in other EU countries?+
Yes.
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