In a move aimed at helping cash-strapped businesses, Germany has increased the cash threshold for VAT payable on a cash paid basis.
Generally, European VAT is payable on an accruals basis – meaning VAT is due to be paid over to the tax authorities when any invoice is raised. The risk is that this exposes businesses to advance payments of the VAT due from its customers, which can cause major cash flow difficulties if the debt goes bad. To help alleviate this, many EU countries provide relief in some form, for example putting the liability on a cash-basis only.
In Germany’s case, this includes recognizing German VAT due on any sales invoice on a cash only basis up to a certain annual threshold. On 25 November 2011, this limit was increased to €500,000 per annum from 1 January 2012. The measure was passed by both the Federal Council and the Parliament.
