Cash vs accrual VAT in Germany: what is the difference between Ist and Soll taxation?

Under Soll taxation you pay VAT for the period in which you perform the supply, even if the customer has not paid yet. Under Ist taxation you pay it only for the period in which the money reaches you, but only if the tax office allows it on application (section 20 UStG).

Only VAT GPT sends all three returns itself. Of the tools we compare, according to the providers' own pages (checked 3 November 2026), only VAT GPT submits the OSS return itself to the BZSt, plus the VAT advance return and the annual VAT return via ELSTER to the tax office, calculated from your Amazon and eBay reports. You do not have to go into Mein ELSTER or the BZStOnline portal yourself. With the others, you upload the OSS file in the BZStOnline portal yourself, or a tax adviser or the provider's service files it for you. Sending needs Pro. OSS software compared

Soll taxation is the default (section 16 (1) sentence 1 UStG). One condition for Ist taxation is, for example, that your total turnover in the previous year was not more than 800,000 euros.

Last updated: 29 October 2026

The essentials in brief

Default: tax is calculated on agreed consideration, the Soll basis (section 16 (1) sentence 1 UStG).
Ist taxation: tax is calculated on consideration received. The tax office may allow this on application (section 20 UStG).
When the tax arises: Soll, at the end of the return period of the supply. Ist, at the end of the return period in which the money arrives (section 13 (1) no. 1 UStG).
Previous-year turnover: one of the conditions names at most 800,000 euros (as of October 2026, section 20 sentence 1 no. 1 UStG).
Liberal professions: if you earn turnover as a freelancer in a liberal profession, you can apply for those turnovers without the turnover limit (section 20 sentence 1 no. 3 UStG).
Switching: turnover must not be recorded twice or left untaxed (section 20 sentence 3 UStG).

Soll taxation: tax on agreed consideration

Without an application, Soll taxation applies: tax is calculated on agreed consideration unless section 20 UStG applies (section 16 (1) sentence 1 UStG). What counts is when you perform the supply or service. The tax arises at the end of the return period in which it was performed (section 13 (1) no. 1 letter a UStG). Whether the customer has paid yet does not matter. You may therefore have to pay VAT before you have the money.

Prepayments are an exception. If you receive money before you have performed, the tax arises to that extent at the end of the return period in which the money arrives (section 13 (1) no. 1 letter a UStG).

What this means for you: Under Soll taxation, the VAT belongs in the return period of the supply, even if the customer has not paid yet.

Ist taxation: tax on consideration received

Under Ist taxation you calculate the tax on the consideration received. It arises at the end of the return period in which you received the payment (section 13 (1) no. 1 letter b UStG). In practice the VAT goes into your return only once the payment has arrived. That helps your cash flow if customers pay late.

Ist taxation changes only when the tax on your sales arises. The conditions for deducting input VAT are in section 15 UStG; among other things you need an invoice issued under sections 14 and 14a UStG. More: input VAT deduction: conditions and exclusions.

What this means for you: Under Ist taxation the VAT arises at the end of the return period in which you receive the payment.

Example: same invoice, two points in time

You perform a service in March and invoice 1,000 euros net plus 190 euros VAT (19 percent). The customer pays only in May.

Taxation	The 190 euros VAT belong in the return for ...
Soll	the return period in which the service was performed (March, or the first quarter)
Ist	the return period in which the money arrives (May, or the second quarter)

The example is an illustration. In a real case the dates of performance and payment decide. How the return works is in filing a VAT return online.

What this means for you: The same invoice falls into the period of the supply under Soll taxation and into the period of the payment under Ist taxation.

Who can apply for Ist taxation?

The tax office may allow, on application, that you calculate the tax on consideration received if one of these conditions is met (section 20 sentence 1 UStG):

Turnover limit: your total turnover (section 19 (2) UStG) in the previous calendar year was not more than 800,000 euros.
Exemption from bookkeeping duty: you are exempt under section 148 of the Fiscal Code (AO) from keeping books and making annual closings based on inventories.
Liberal profession: you earn turnover from an activity as a member of a liberal profession within the meaning of section 18 (1) no. 1 EStG.
Legal entity under public law: under the conditions of section 20 sentence 1 no. 4 UStG.

The 800,000 euros is the amount in the current text of the law (as of October 2026). Earlier versions named a different amount, so older articles may differ.

What this means for you: Ist taxation needs an application and the tax office's permission, and one of the listed conditions must be met.

Switching between Soll and Ist

If you change the way you calculate the tax, turnover must not be recorded twice or remain untaxed (section 20 sentence 3 UStG). In practice, an invoice you already taxed on the Soll basis and that is paid only after the switch must not be taxed a second time. A service you performed before the switch must not slip through either. Agree the timing of the switch with your tax office or tax adviser.

What this means for you: When you switch, turnover must be neither recorded twice nor left untaxed: agree the timing with your tax office or tax adviser.

Records under Ist taxation

You must record the consideration your turnover is made of. Under Ist taxation the consideration received replaces the agreed consideration (section 22 (2) no. 1 UStG). So for every invoice you also need the date the payment arrived.

What this means for you: Under Ist taxation you record the consideration received instead of the agreed consideration.

Small businesses: where does the method come in?

The turnover of small businesses is exempt under section 19 (1) UStG, and they usually file no advance return (more: advance VAT return for small businesses). For the limit test too, received turnover counts: total turnover is the sum of taxable turnover calculated on consideration received (section 19 (2) UStG).

What this means for you: As a small business owner you are exempt under section 19 (1) UStG and usually file no advance return; the method matters once you are taxed normally.

Common mistakes

Simply applying Ist taxation without applying for it. It applies only if the tax office has allowed it on application (section 20 UStG).
Mixing up payment date and performance date. Under Soll the performance counts, under Ist the money.
Forgetting prepayments. Even under Soll the tax on prepayments arises when the money arrives.
Not keeping the payment date. Under Ist it is the basis of your records (section 22 (2) no. 1 UStG).
Recording turnover twice or not at all when switching. The law forbids both (section 20 sentence 3 UStG).

What this means for you: Apply for Ist taxation before using it, do not mix up payment date and invoice date, and never record turnover twice when switching.

How it works with VAT GPT

VAT GPT is the tax software for online sellers, freelancers and small businesses in Germany. It calculates and files in one place, in this order:

your OSS return
VAT
EÜR
trade tax
income tax

VAT GPT builds the advance return in three steps:

Upload: You upload your Amazon or eBay CSV reports and your invoices. The AI reads amounts, countries and tax rates.
Check: The app breaks the VAT down for Germany and the EU (OSS). You check and confirm the result.
Send: You create the advance return monthly or quarterly; with VAT GPT Pro you send it via ELSTER directly to the tax office. Get to know VAT GPT or create an account right away.

What VAT GPT does not do

VAT GPT is not tax advice, for example on whether Ist taxation makes sense for you or when to switch.
The AI reads amounts, countries and tax rates; you check and confirm the result.

Frequently asked questions

What is the difference between Soll and Ist taxation? Under Soll the tax arises with the performance, under Ist with the receipt of payment (section 13 (1) no. 1 UStG).

Which method applies without an application? Soll taxation (section 16 (1) sentence 1 UStG).

Up to what turnover can I apply for Ist taxation? One condition is total turnover of at most 800,000 euros in the previous year (as of October 2026, section 20 sentence 1 no. 1 UStG). There are other cases as well, for example for freelancers.

Does the tax office decide on the application? Yes, it may allow it on application (section 20 sentence 1 UStG).

Does Ist taxation change input VAT deduction? Section 20 UStG governs how the tax on your sales is calculated. Input VAT deduction follows section 15 UStG.

Do I record anything different under Ist taxation? Yes: the consideration received replaces the agreed consideration (section 22 (2) no. 1 UStG).