Cash accounting (officially “taxation on amounts received”) is a special rule you may apply for if certain conditions are met. “Ist” refers to the actual state - that is, the money you have actually received. You only pay VAT to the tax office after your customer has paid you.
Example:
You issue an invoice on 15 March for €1 000 + €190 VAT.
Your customer doesn’t pay until 20 June.
With cash VAT accounting you declare the €190 VAT only in the June (or Q2) return and pay it in July. If the customer pays even later, or never, you owe no VAT until the money arrives.
Although cash VAT accounting is a special rule, most sole proprietors meet the conditions, so Accountable applies it by default. The moment you register as self-employed in Accountable you are automatically treated under the cash method.
Accrual VAT accounting (officially “taxation on amounts agreed”) is the standard method in Germany. “Soll” means the amount agreed on the invoice, regardless of when it is paid. As soon as you issue an invoice, the VAT shown becomes due - based on the invoice date, not the payment date.
Example:
You issue an invoice on 15 March for €1 000 + €190 VAT.
Under the accrual method you declare the €190 VAT in the March (or Q1) return and pay it even if the customer hasn’t paid yet. If the client pays late, or never, you have to pre-finance that €190 out of pocket.
💡
The difference between the two methods concerns only when you pay VAT to the tax office. Your input VAT (VAT on your expenses) can be claimed immediately in both cases as soon as you receive a proper supplier invoice.
The practical distinction is therefore the moment the tax becomes due:
Accrual → due on invoice date
Cash → due on payment date
Accrual accounting is the default; every entrepreneur is treated that way unless the cash method is applied for and approved. You may switch to cash VAT accounting (§ 20 UStG) if you meet one of the following:
Turnover limit (previous year): total turnover did not exceed €800 000.
Freelance profession: you are a freelancer under § 18 EStG, regardless of turnover.
Exemption from bookkeeping: you are exempt under § 148 AO.
For start-ups without prior-year turnover the tax office usually approves the cash method as long as you are expected to stay below the limit.
These rules are independent of the Small-Business (Kleinunternehmer) rule (§ 19 UStG). If you use the Kleinunternehmer scheme you don’t charge or remit VAT at all, so the cash vs. accrual question is irrelevant.
Check eligibility for the cash method. If you qualify, it is usually the better option because you don’t have to set money aside before your customer pays.
If you are (still) on the accrual method, because your turnover is too high or you didn’t apply, pay special attention to liquidity. Reminders and dunning become important to shorten payment times.
❗ Important❗
At present Accountable supports only cash VAT accounting.
If you have any questions, feel free to contact one of our tax coaches via chat or email us at support@accountable.eu.
Author - Valesca Wilms
As content marketing lead at Accountable Belgium, Valesca writes about freelancing, self-employment, and taxes based on her own experience as a freelancer.
Who is Valesca ?Thank you for your feedback!
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