VAT

VAT is a tax on services that entrepreneurs provide. As a self-employed performer you add it to your fee, show it on the invoice, collect it with the payment and pass it on to the tax office. It is at no time your money.

The principle in four steps

First: you provide a service, for example a shoot day, and issue an invoice for it. Second: on that invoice the net amount, the tax amount and the gross amount stand separately. Third: the client pays gross. Fourth: you declare the tax collected with the tax office and pay it there.

The offset happens through input VAT. In the invoices you yourself pay — camera, travel costs, studio hire, tax advice — there is VAT as well. You set this input VAT paid against the tax collected. What remains is only the difference, and that is remitted or refunded.

The advance return

The settlement does not run once a year, but continuously through the VAT advance return. It is transmitted electronically, on a monthly or quarterly rhythm. Which rhythm applies to you and which deadlines have to be kept is set by the tax office; the rules for that are regularly adjusted and therefore not reproduced here with figures.

At the end of the year the VAT return follows, which summarises the advance returns. Anyone who misses deadlines risks late surcharges and estimates — both avoidable and both expensive.

For everyday work that means: VAT is not a yearly task but a running process. Anyone who only sorts receipts in spring has already filed the previous year’s advance returns as estimates and has to correct.

Why that matters for your own calculation

The most common mistake among the self-employed is reaching into the VAT. The gross amount sits in the account; it feels like all earned money. In fact a part belongs to the tax office and becomes due later. Anyone who does not set that share aside has a liquidity problem even though the profit is right.

Practical consequence: separate the tax share on every incoming payment, preferably onto a second account. The profit calculation itself runs separately through the cash-basis profit calculation, in which VAT does not create profit.

What you need for that

What is needed is a tax number for your business, correct invoices with all mandatory details, and access to electronic transmission. With clients abroad, for example platforms based outside Germany, different rules apply to the place of supply and the tax debtor; a VAT identification number is often required for that.

Whether you have to charge VAT at all hangs on whether you apply the small-business VAT scheme. An overview of registration and everyday practice is in the article trade and tax for performers.

This entry places the mechanics in context and is not a substitute for tax advice. Rates, deadlines and special rules change; binding information comes from the tax office and tax advice.