Understanding VAT (Umsatzsteuer) · 2.7
Cash Accounting or Accrual Accounting for VAT?
Under Soll-Versteuerung (accrual basis VAT), VAT arises when your service is rendered, even if the customer has not paid yet. Under Ist-Versteuerung (cash basis VAT), it only arises once the money has been received. Accrual is the default; you must apply for cash basis.
Key points
Example: Service provided in December, invoice for €1,190, payment received in February.
- Accrual (Soll): You report the €190 VAT in the preliminary return for December.
- Cash (Ist): You only report the €190 for February.
You apply for Ist-Versteuerung with the Finanzamt (tax office), for example directly in the Fragebogen zur steuerlichen Erfassung (tax registration questionnaire). For a UG and GmbH, it is permitted as long as your revenue stays below a certain threshold. It only affects your own VAT: you continue to deduct input VAT (Vorsteuer) as soon as you receive the invoice. Customer prepayments/down payments are taxed under both systems as soon as the money is received.
If your customers often pay late, Ist-Versteuerung provides a real liquidity advantage.
Figures & thresholds (as of November 2026)
- Ist-Versteuerung: up to €800,000 total turnover in the prior year
- From 01.01.2028: businesses using cash accounting must indicate this on their invoices; their customers can only deduct input tax once payment is made
Legal basis
§ 13 UStG§ 16 UStG§ 20 UStG§ 15 UStG
Continue
- Next video: What Must Be on an Invoice? Mandatory Details
- Related: Customer Advance Payments: When Is VAT Due?
- Related: What is the tax registration questionnaire?
Pluto automatically takes into account whether you use accrual or cash accounting in your preliminary VAT return.
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