(2022)
What are the specific features regarding the advance VAT return?
The advance VAT return must be calculated by the 10th day after the end of the advance return period, submitted electronically to the tax office, and is also due for payment. For the month of December or - for quarterly payers - for the fourth quarter, the payment must be made by 10 January of the following year (§ 18 para. 1 UStG).
The question is to which year this payment should be assigned for VAT and income tax purposes.
- VAT: To calculate the VAT liability, the payment for December or the fourth quarter must be attributed to the old year in the annual VAT return (§ 18 para. 1 UStG).
- Income tax: In profit calculation using the cash method, the advance VAT payment for December or the fourth quarter is treated as business expenses of the old year. However, this only applies if the payment is made by 10 January of the new year. The VAT payment is a regularly recurring expense that is attributed to the year to which it economically belongs if paid within 10 days after the end of the calendar year. Therefore, for those using the cash method, the payment in January can still be deducted as business expenses in the old year (BMF letter dated 10.11.2008, BStBl. 2008 I p. 958; BFH judgment dated 1.8.2007, BStBl. 2008 II p. 282).
What applies if 10 January is a Saturday or Sunday, as in January 2021?
- VAT: In this case, the due date for the advance VAT payment is postponed to the next working day - for the December 2015 payment, this is 11 January 2016, and for the December 2020 payment, it is 11 January 2021 (§ 108 para. 3 AO).
- Income tax: The tax authorities are very strict regarding income tax: If the advance VAT payment is made after 10.1.2016, it can no longer be considered as a business expense in the 2015 annual account for those using the cash method, but must be recorded in the 2016 annual account. Payment after 10 January is no longer a regularly recurring expense (OFD North Rhine-Westphalia dated 7.3.2014, Kurzinfo ESt 9/2014; confirmed by BFH judgment dated 11.11.2014, VIII R 34/12).
- Furthermore, the tax authorities believe that not only must the payment be made, but the due date must also have occurred by 10 January. This was not the case in January 2015 and January 2016, as the due date was extended to the next working day in accordance with § 18 para. 3 UStG - and thus fell outside the 10-day period. This means that even timely payments before 10.1.2016 would generally make it impossible to deduct them as business expenses in 2015.
The Federal Fiscal Court has recently delivered a strong rebuke to the tax authorities: Advance VAT payments made within ten days after the end of the calendar year are also tax-deductible in the previous year if 10 January of the following year falls on a Saturday or Sunday. The extended "due date" on the following working day is irrelevant for income tax purposes (BFH judgment dated 27.6.2018, X R 44/16).
Even if the tax authorities require that the advance VAT payment must be "due" within the ten-day period, this condition is met. When determining the due date, only the statutory deadline of § 18 para. 1 sentence 4 UStG should be considered, not a possible extension of the deadline in accordance with § 108 para. 3 AO. This extension is not applicable in connection with § 11 para. 2 EStG for income tax, as it is merely a fiction of inflow and outflow.
However, be careful: The regulation is extremely complicated and has numerous peculiarities, such as in the case of direct debit. If in doubt, ask your tax office when the advance VAT payment should be recorded.
