Peculiarities of Corporate Financial Reporting in Germany

Psoted on: June 17, 2021 at 6:41 am, in

The obligation to submit financial statements is an attribute of entrepreneurial activity. These accounts show the property and financial position of the company and the results of its business activities in the reporting period. They are, in addition to the information function, a basis for the taxation of the company and the determination of dividends. 

The German Commercial Code (HGB) regulates the basic requirements for the financial accounting of companies in Germany. The main components of the annual financial statements are:  

  • A balance sheet;  
  • The profit and loss statement;
  • Explanatory notes; 
  • A management report on the company’s status and prospects. 

Financial Reports in Germany: Structure and Characteristics 

Reports are the company’s financial statements for a quarter (3 months) or a year. Accordingly, they consist of such reports: 

  • Statement of loss and profit;
  • Balance sheet; 
  • Cash flow statement; 
  • A statement of changes in equity; 
  • As well as explanations, plans, and strategies of the company. 

First and foremost, any report is a very large amount of information, so, it is important to make it structured and submit it within a specified time frame.  

Important side note: Clevver is developing a new service called the Compliance Center. This compliance center will have a compliance calendar included that will help entrepreneurs globally to keep up with the regulations of different countries and inform about important due dates for filings. The Compliance Center will be launched in a first Beta version in July/August. 

Financial reporting requirements vary depending on the size of the organization. Companies doing business in Germany are divided into small, medium, and large enterprises. The criteria for classifying the size of a company are the sum of the balance sheet, the annual turnover, and the number of employees. 

The requirements for the financial statements of the company and a number of simplifications in the financial accounting of businesses directly related to the size of the company. The latter also affects the records’ composition and content, the timing, and the scope of their publication. 

Thus, the smallest and medium-sized enterprises, besides a number of other simplifications, are given the possibility to publish financial statements in abbreviated form. Medium-sized enterprises also enjoy a number of exemptions from the general requirements for financial reporting. 

Financial Statements 

The length of the fiscal year is determined in the shareholders’ agreement, with the fiscal year not exceeding 12 months. A trading company is obliged to keep accounting records. They must include a balance sheet (annual balance sheet) and a profit and loss account. In addition, the annual financial statements must contain records with explanatory notes. These must be in German. The annual financial statements must comply with accounting standards of Germany and the European Union, give a true picture of the company’s assets, finances, and profits. 

§§ 325-329 of the German Commercial Code (HGB) provide strict rules for the disclosure of the annual financial statements of capital companies. The directives also apply to trading companies (general partnerships) and limited partnerships in which the company is not the personally liable partner.  

Tax Reporting 

A tax year is a calendar year. Tax returns are filed for the company’s fiscal year ending in the respective calendar year. The standard filing date for returns is by July 31. Tax returns are filed electronically. Quarterly provisional tax payments are made during the year with a final payment at the end of the year. 

IFRS System 

IFRS (International Financial Reporting Standards) records is company’s financial statements prepared in accordance with international standards for a wide range of users. It is used by companies that list their shares and securities on European financial markets, as well as control the activities of subsidiaries and branches. The purpose of the IFRS reports is to present information on the financial position and results of the company operation. 

The main standard, which regulates the formation of the financial statements in accordance with IFRS is IAS 1 “Presentation of Financial Statements”. It defines the criteria of its compliance with IFRS rules, as well as requirements regarding materiality, continuity of operations, obligatory components of financial statements. The standard contains recommendations on the preparation of each of the main reporting forms and establishes general requirements for the recognition and evaluation of records of subjects of operations. 

Bottom Line 

A company’s financial statements are data that reveal the company’s current economic situation, performance, and changes in financial position. Statements are made from accounting data. These papers must be prepared in the right form (German national standards and IFRS) and be submitted in the appropriate time frame.

Clevver is developing a new service called the Compliance Center that will assist entrepreneurs with a compliance calendar and inform them about important filings and due dates. The service will be available in July/August 2021 in the form of a web application and it will be completely free of charge. If you are interested in the new Clevver Compliance Center or general information regarding the assistance with the registration of companies globally, our Clevver Team is always there to help.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.


Steuernummer and Umsatzsteuer-ID. What Is the Difference?

Psoted on: March 16, 2021 at 10:03 am, in

Germany uses many different tax identification numbers. For an entrepreneur who writes an invoice for the first time, it can be difficult to distinguish them. They are faced with the question: Do I have to state a Steuernummer (a tax number) or Umsatzsteuer-ID (VAT ID) on the invoice? Finally, both numbers can be given on the invoice. You can now find out the difference between those two tax numbers and when exactly which one is required.

Steuernummer vs. Umsatzsteuer-ID: What is What?

As an entrepreneur, you can have both a Steuernummer and Umsatzsteuer-ID (VAT ID, sales tax ID) in Germany. Both numbers equally serve for tax identification.

Steuernummer

A Steuernummer is your tax identification number. Every private (legal) person in Germany has such a tax number. If you write an invoice, you usually have to provide it for identification.

Steuernummer Brief Factsheet

  • Steuernummer may also be referred as Steuer-Identnummer or St-Nr
  • It’s a 10- or 11-digit number, and has the format “12/345/67890”. It’s sometimes written in the unified federal format as “3012034567890” (the first two digits are the number of your Bundesland). 
  • You get a Steuernummer after you fill the Fragebogen zur Steuerlichen Erfassung. You will receive your tax number by mail, 2 to 4 weeks after you submit the form. If it takes longer, call your local Finanzamt (Tax Office), and ask for your tax number. You can also go in person. 
  • The Steuernummer is unique, but not permanent. If your business moves to a different Finanzamt’s area, you will get a new Steuernummer.

Umsatzsteuer-ID

An Umsatzsteuer-ID (VAT ID) can only be assigned to companies in certain cases and is your tax identification number for other EU countries. In other words: it may be necessary when you write an invoice to a business partner in another EU country.

Umsatzsteuer-ID Brief Factsheet

  • Umsatzsteuer-ID may also be referred as Umsatzsteuer-Identifikationsnummer, USt-Identifikationsnummer or USt-IdNr
  • It’s a 9-digit number with the format “DE123456789”. 
  • You also get a VAT number by filling the Fragebogen zur Steuerlichen Erfassung. You will not get a number if you declare a small business (Kleintunternehmer), because small businesses do not need to charge VAT. 
  • When you receive a VAT number, you must put it in your Impressum. It’s the law.

Stating of the Steuernummer and Umsatzsteuer-ID on the Invoice

You should always state one of these two tax numbers on the invoice. But when exactly each of them is required on the invoice? Have a look at the table presented below.

INVOICES

STEUERNUMMER UMSATZSTEUER-ID

You enter Steuernummer when you send invoices to another entrepreneur or to a private person who is based in Germany. It is, so to speak, your domestic German tax identification number.

However, you are also allowed to enter the VAT ID (sales tax number) instead of the Steuernummer also within Germany.  
  
In fact, many entrepreneurs prefer to include their VAT ID on invoices within Germany because it is more secure from a data protection perspective.


Umsatzsteuer-ID (VAT ID) is required if you and your customer are both regular entrepreneurs subject to VAT and your customer is based in another EU country. Because then the principle of intra-community delivery or service applies: Your customer, not you, has to pay the sales tax for the purchase to their tax office.






In order to handle the VAT transaction within the EU, you and your customer must both be identified by a European VAT ID. You must therefore state both your VAT ID and your customer’s VAT ID on the invoice. In addition, in this case, you are not allowed to show any other tax number on the invoice. Otherwise, your customer would pay sales tax twice: once to you and once to their tax office.  

If you are a small business owner or your customer is a small business owner or a private person, the principle of intra-community delivery/service does not apply. This means that there is no need to include a sales tax ID on the invoice.

Foreign Companies and the German Umsatzsteuer-ID (VAT ID)

Foreign businesses that conduct taxable activities in Germany may be required to apply for a German VAT number. Typically, these activities include:

  • Imports into Germany; 
  • Buying and selling goods in Germany; 
  • Conducting live events with ticket sales; 
  • Sale to German consumers via the Internet.

Applications for a VAT number must be submitted to the appropriate tax office. The choice depends on where the foreign company is located. Non-EU companies wishing to register must apply to the tax office in Berlin.

Summary

The Steuernummer and Umsatzsteuer-ID are both tax identification numbers that the tax office can use to assign invoices to companies. If you write an invoice to a customer in Germany, the Steuernummer on the invoice is sufficient. If your customer is based in another EU country, you have to state the Umsatzsteuer-ID on the invoice under certain conditions: this is the case if you and your customer are both regular entrepreneurs who are subject to VAT. 

While the tax office automatically provides you with a Steuernummer when you set up your company, you must explicitly apply for the Umsatzsteuer-ID at the Federal Central Tax Office. You will not get this tax number if you declare a small business (Kleintunternehmer), because small businesses do not need to charge VAT.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.