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Exception for submitting the sales tax pre-registration, Umsatzsteuer-Voranmeldung (USt-VA) for Holding Company? (Part 6 of Founding a Company) ​

Introduction ​

In this sixth article - if you have not read it, start with the first article - I continue telling you about the highlights of incorporating two companies in a holding structure in Germany. This article focuses on the exception for submitting the sales tax pre-registration, Umsatzsteuer-Voranmeldung (USt-VA) for a Holding Company.

In follow-up post(s) I'll continue with challenges around the opening the bank account for the operative GmbH and further highlights until finally having both companies ready.

Hi 👋

This is Kai Mindermann, the CEO of NuInnovate - with the vision of creating a world where every improvement serves a meaningful purpose. Just wanted to quickly say: Enjoy your day!

Sales Tax Pre-Registration / Umsatzsteuer-Voranmeldung (USt-VA) ​

Usually, a corporation needs to let the tax office know regularly during the year how much sales tax they need to pay (or get back), and also actually already pay. This is done after every month or after every quarter, with the possibility to extend the deadline to submit the form by one additional month (Dauerfristverlängerung). This sales tax pre-registration is called Umsatzsteuer-Voranmeldung, in short USt-VA.

For my holding company this would mean that I would have to calculate the sales tax 4 times a year and send the tax office a report. Also, they would have to check it and see that nothing much has happened, as the Holding Company's main purpose is to hold the shares of the operative GmbH and possibly others. But, not many bookings with sales taxes are expected in the Holding.

Therefore, I researched if it would be possible to exempt the Holding from this process during the year.

Exception from the Sales Tax Pre-Registration ​

As it turns out, there is actually a law which states that the tax office can exempt you: "If the tax for the previous calendar year does not exceed EUR 1,000, the tax office may exempt the entrepreneur from the obligation to submit advance returns and make advance payments." ("Beträgt die Steuer für das vorangegangene Kalenderjahr nicht mehr als 1 000 Euro, kann das Finanzamt den Unternehmer von der Verpflichtung zur Abgabe der Voranmeldungen und Entrichtung der Vorauszahlungen befreien.") § 18 Abs. 2 Satz 3 UStG.

Unfortunately this does not apply directly to a newly founded corporation, as there is no previous year.

After further research, I couldn't find more resources about if this is done in practice by tax offices for newly founded companies as well.

That's when I decided to write them a simple message, asking for this exemption.

Informal Request to the Tax Office ​

In the following I provide you with the message that I sent via the Elster platform where you have the opportunity to send Other message to the tax office (Sonstige Nachricht an das Finanzamt):

Dear Sir or Madam

Can you exempt the company Holding GmbH from the advance VAT return? I do not expect any taxable sales in the near future, sales will probably be generated by subsidiaries, but not by Holding GmbH for the time being.

I would be happy if we could save each other the effort of filing advance returns for a while and the annual return is enough 😃. You can also tell me a limit from which quarterly pre-declarations have to be made again.

Thank you for your feedback and have a nice day!

Yours sincerely

Sehr geehrte Damen und Herren,

können Sie die Firma Holding GmbH von der Umsatzsteuer-Voranmeldung befreien? Ich rechne nicht mit steuerbaren Umsätzen in nächster Zeit, Umsätze werden voraussichtlich von Tochterunternehmen erzielt, aber bis auf weiteres nicht von der Holding GmbH.

Würde mich freuen, wenn wir uns eine Weile gegenseitig den Aufwand für die Voranmeldungen sparen können und die Jahreserklärung reicht 😃. Sie können mir auch gerne eine Grenze nennen, ab der wieder vierteljährlich Voranmeldungen gemacht werden müssen.

Vielen Dank für Ihre Rückmeldung und noch einen schönen Tag!

MfG

Unfortunately, I got no reply from the tax office, so I already started to prepare the form for the first quarter.

No answer means the tax office accepted a request ? ​

When I called the tax office about a different subject, and brought up if they received or handled the above request they stated that the request was granted. Apparently, and I think I read this somewhere else but can't find it or remember it, when you get no answer from the tax office for a request, that means they accepted or granted it. Of course, no guarantee for this!

I was really happy as this meant less, in this case unnecessary, work for the management of the Holding company 😃.

I'm not sure if the tax office had done the exemption based on the estimations or if it was really necessary for me to ask for it.

Keep in mind, the Holding GmbH still has to calculate the sales tax obligations for each full business year! But not multiple times additionally throughout the year anymore.

Next steps ​

So far I already covered a few aspects which I discovered, learned and experienced:

In the next post(s) I'll highlight the next steps, some of which I did not comprehend quickly in the - for me - necessary detail:

Disclaimer

The content provided in our articles is for informational purposes only and should not be construed as legal or tax advice. Readers are encouraged to seek professional advice from qualified professionals regarding their specific legal or tax situations.