VAT options for ensuring liquidity in the case of Value Added Tax

17.04.2020 – "Phased" accrual taxation through direct application of Art. 64 of the EU VAT directive or transition to the cash accounting method through interpretation of sec. 17 German VAT Act/Art. 90 of the EU VAT directive


As a result of the Corona crisis, many suppliers and service providers are faced with the dilemma of having to continue to fulfil their contracts, but in the first place not being paid due to their customers' lack of liquidity.

Some companies are forced to accept instalments, but many also want to support their (often long-term) customers in the current situation.

According to the principle of taxation on the basis of agreed remuneration, Sec. 13 (1) sentence 1 no. 1 letter a of the German VAT Act ("UStG"), VAT accrues at the time of performance of the service, i.e. in principle independently of receipt of the agreed consideration (fee, remuneration). This means that the entrepreneur must pre-finance the VAT over a longer period of time if, for example, he grants his customers longer payment terms, the consideration is linked to conditions and/or time limits or, as in the current crisis, simply is not paid.

To learn more, download the attached PDF.

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VAT options for ensuring liquidity in the case of Value Added Tax