Umsatzsteuer in Ratenzahlungen: Can VAT be paid in instalments in Germany?

If payment is made in instalments, entrepreneurs can also pay Umsatzsteuer (VAT) in instalments. However, one particular Finanzamt (tax office) refuses to accept this arrangement and has gone to court over it. Let’s unpack the tax ruling and what it means for businesses in Germany.


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When is it possible to pay VAT in instalments?

Businesses that agree with customers to pay in instalments over several years must also only pay VAT in instalments. This is because the payment is “irrecoverable” until the instalment is due, as the Niedersächsisches Finanzgericht (Lower Saxony Tax Court) ruled (case No. 5 K 288/15).

As a rule, the Sollbesteuerung (debit taxation) applies to VAT. This means the tax must be paid to the tax office as soon as the company has invoiced its service including VAT.

The time of receipt of payment is not essential. However, the company can correct its VAT returns if a payment has become ‘uneinbringlich‘ (irrecoverable).

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Do I have to pay tax immediately after invoicing?

The case in question concerns a company that acts as an agent for professional footballers. The clubs don’t pay the commission due in one go, but in instalments throughout the player’s contract. The player’s agent disputed with the tax office whether he had to pay the VAT due on the commission immediately in one go, even though the club paid its instalments, and thus the VAT proportionately, up to two years later.

The Finanzgericht Hannover (fiscal court of Hanover) has now ruled that, at least in the case of payment by instalments over several years, the remuneration is temporarily “irrecoverable”. In this case, the player’s agent could not expect to receive the final instalment for more than two years. He would therefore have to pay the VAT at a later date. The tax office in the case remains persistent and has appealed against this ruling to the Bundesfinanzhof in München (federal fiscal court in Munich) (case no. V R 51/16).



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