Tax Prepayments (“Steuervorauszahlung”) - The Complete Guide

A German tax prepayment (“Steuervorauszahlung”) is the quarterly installment the tax office collects in advance—typically from the self‑employed—to spread your expected annual tax bill across the year.

Standard deadlines are 10 March, 10 June, 10 September, and 10 December. If a date falls on a weekend or public holiday, payment is due on the next working day.

What exactly is a tax prepayment?

A tax prepayment is a quarterly down‑payment on the income (and sometimes trade) tax you’re projected to owe for the current calendar year. Rather than waiting for your annual return, the German tax office (Finanzamt) spreads your liability across four instalments. Think of it as a “pay‑as‑you‑go” system designed to protect the state’s cash flow—and your own—by avoiding one giant bill at year‑end.

How the finance office estimates your bill

1. Last known numbers – The starting point is your most recent tax assessment (or, for brand‑new businesses, the figures you entered in the “questionnaire for tax registration”).

2. Projected profit – The officer applies the same or a slightly adjusted profit to the current year, assuming business stays comparable.

3. Tax rate & allowances – Basic allowance, church tax status, kids, etc. influence the effective rate.

4. Divide by four – The resulting annual tax is split into four equal parts, due 10 Mar, 10 Jun, 10 Sep, 10 Dec.

Good to know: If your last return showed less than €400 tax due, no prepayments are set at all.

Prepayments vs. final assessment—how they reconcile

• During the year: You pay the calculated instalments on the four standard dates.

• After year‑end: You file your tax return. The finance office now has the real numbers.

  • Overpaid? The surplus is automatically refunded—no extra paperwork.

  • Underpaid? You’ll receive a single catch‑up invoice (plus 1 % interest per month if the gap is large and late).

• Next cycle: The fresh assessment becomes the baseline for next year’s prepayments, so the system self‑corrects—unless you proactively apply for an adjustment when income swings up or down mid‑year.

Bottom line: prepayments aren’t an extra tax; they’re simply a timing shift. Manage them well, and you eliminate nasty surprises while keeping your cash‑flow predictable.

Who has to make tax prepayments?

Self‑employed, freelancers, and tradespeople

If you invoice clients on your own account—whether as a sole‑trader, freelancer, or registered trade (Einzelunternehmen, GbR, OHG, etc.)—the tax office treats you as “self‑assessed.” Once your last income‑tax assessment showed more than €400 due, you’ll automatically receive a quarterly prepayment plan.

• Tradespeople also face trade‑tax prepayments once annual profit tops €24,500.

• Corporate forms (GmbH, UG) pay the same way, just under “corporation‑tax” rules.

Employees & pensioners—when side income triggers payments

Your wage or pension already has withholding tax, but any additional untaxed income—think freelance gigs, Airbnb rentals, stock dividends from abroad—can push the balance above that €400 trigger. The moment your final assessment shows a meaningful under‑payment, the Finanzamt schedules prepayments for the next year.

Typical tipping points:

•  €410 untaxed side income (§46 EStG)

• Spouse income mix that leaves a gap (tax classes III/V)

• Rental or capital gains where no German withholding applied

Thresholds and exceptions (basic allowance, small‑business clause)

Bottom line: If your last return showed a material balance owing, expect the Finanzamt to split that number into four equal chunks for the following year—unless you fall under one of the allowances above. Proper cash‑flow planning starts with knowing which side of each threshold you’re on.

When are prepayments due for each tax type?

Income tax

• Standard deadlines: 10 March, 10 June, 10 September, 10 December.

• If a date lands on a weekend or public holiday, payment is due the next working day.

• Best practice: Authorise the finance office’s SEPA direct debit—one form, zero missed deadlines and no late‑payment interest.

Trade tax (Gewerbesteuer)

• Quarterly dates: 15 February, 15 May, 15 August, 15 November—set nationally, but the cash goes to your local municipality.

• Municipalities still use separate IBANs; double‑check the account printed on your assessment notice before setting up a standing order.

• Missed a date? Local tax offices are quick to add penalties, so build a calendar alert a week in advance.

VAT advance returns (Umsatzsteuer‑Voranmeldung)

• Monthly or quarterly filing—depends on your prior‑year VAT liability.

  • Monthly: file and pay by the 10th of the following month.

  • Quarterly: file and pay by the 10th of the month after quarter‑end (10 April, 10 July, 10 October, 10 January).

• Dauerfristverlängerung: Opt‑in once via ELSTER, pay a one‑time “special advance VAT” (1/11 of last year’s VAT), and you gain an extra one‑month grace period on every filing.

• Pro tip for cash‑flow: run your bookkeeping weekly so the VAT number is ready to submit—no end‑of‑period scramble, no guesswork.

Where do I transfer my tax prepayments?

Finding the correct tax‑office IBAN

Every prepayment notice (Vorauszahlungsbescheid) has a payment block—usually on page 1 in the upper right. There you’ll see:

• IBAN and BIC of the relevant Finanzkasse (income tax and VAT) or your city’s treasury (trade tax).

• Reference line (Verwendungszweck)—typically your tax number + assessment period; copy it exactly so the payment auto‑matches.

• Amount and due date for each instalment.

Tip: If you misplace the letter, most state revenue portals list IBANs by tax‑office district. A 30‑second search for “Finanzamt Berlin Pankow bank details” usually lands you on the right PDF cheat‑sheet.

Setting up SEPA direct debit vs. standing order

Rule of thumb: Unless your cash‑flow is ultra‑tight and you need to micromanage every euro, the direct‑debit mandate is the stress‑free route—no diary alerts, no penalties, no angry letters.

Where do I record tax prepayments in my tax return?

Automatic offset in ELSTER

Good news first: in ELSTER you don’t have to type a single prepayment figure manually. The portal fetches your quarterly payments straight from the Finanzamt ledger and nets them against your calculated annual tax while you’re filling in the return. You’ll see the numbers reflected on the “Ergebnis” page at the end—but every intermediate form stays blissfully blank.

Heads‑up: The auto‑match only works if the payments were booked under the correct tax number and period. Wrong reference line on the bank transfer? Call the Finanzamt bookkeeping desk and have them re‑allocate before you file.

Entry fields in Norman

Using Norman? Our tax‑wizard screen includes a section called “Advance payments already made”. If you added the payments to accounting, Norman will automatically include them in the annual declaration.

The software passes the figure to ELSTER in the XML payload, so the Finanzamt still validates it against its own records.

Trade‑tax & VAT:

• Trade‑tax prepayments go into the “Gewerbesteuer‑Erklärung” under “§19 GewStG Vorauszahlungen” (lines vary by tool).

• VAT advance payments belong in the annual VAT return, line “Summe der Vorauszahlungen”. Norman auto‑fills this if you filed monthly/quarterly declarations through Norman.

Can I reduce or avoid excessive prepayments?

Applying for a downward adjustment (template + evidence)

When your profits dive—or simply don’t match last year’s banner numbers—you can file a “Herabsetzungsantrag” (application to reduce prepayments) at any time. Fastest route:

1. ELSTER → “Anpassung der Vorauszahlungen”

2. Enter your new profit forecast for the year.

3. Attach proof – e.g. year‑to‑date revenue spreadsheet, BWA, doctors’ note for long illness.

4. Hit “Send” and keep the receipt PDF.

Plain‑text fallback template (email/letter)

Subject: Request to reduce income‑tax prepayments for 2025

Dear Sir or Madam,
My projected 2025 profit is approx. €42 000 (down 35 % from 2024).  
Reason: two major clients paused projects in Q2‑Q3.  
Please adjust my quarterly prepayments accordingly.

Supporting docs attached: revenue list Jan‑Jun, current order book.

Kind regards,
[Name] – Tax no. xx/xxx/xxxx

⚠️ If the gap between paid and real tax later exceeds about €10 000, late‑payment interest of 0.15 % per month (1.8 % p.a.) applies, so keep forecasts realistic.

Scenario planning: lower turnover, parental leave, illness

File early—before the next 10 Mar/10 Jun/10 Sep/10 Dec deadline—so the lower amount is pulled instead of the higher one.

Smart bookkeeping to prevent liquidity crunches

• Ring‑fence tax cash: Auto‑transfer 30 % of every invoice to a “tax stash” sub‑account; that pile will always over‑cover income‑ and VAT‑prepayments.

• Rolling 12‑month P&L forecast: Update monthly; if projected profit drops 20 %+, trigger a fresh reduction request.

• Use alerts in your accounting app: Most tools (SevDesk, Lexoffice, Datev) flag upcoming prepayment dates and amounts—sync them to your calendar.

• Quarterly “reality check” meeting: Ten minutes after each VAT filing, compare actual YTD profit with the figure sent to the Finanzamt. If off by > €5 000, adjust now rather than risking a year‑end shock.

Handle prepayments like any other subscription—monitor, tweak, and you’ll never let the tax office choke your cash‑flow again.

Is it possible to refuse a tax prepayment entirely?

Legal grounds for objection or deferral

Reality check: An outright refusal is only granted in rare hardship cases. In most situations you either (a) lower the prepayment through a forecast update or (b) postpone collection via AdV/Stundung.

Consequences—interest and penalties

Bottom line: You can’t simply say “no”—you must act within one month, supply solid evidence, and be ready to pay standard or, in AdV cases, elevated interest if your forecast proves too optimistic. Handle it proactively and the finance office will usually play ball; let deadlines slide and the cost rises fast.

Which forms and tools do I need?

ELSTER online “Adjust prepayments” form

The quickest route is pure click‑work inside ELSTER:

1. Log in → “Meine Formulare” → “Anpassung der Vorauszahlungen” (yes, the menu is still in German).

2. Pick the tax year you want to tweak.

3. Scroll to “Voraussichtlicher Gewinn/Einkommen” and enter your revised profit figure—ELSTER auto‑recalculates the new quarterly amount.

4. Attach evidence (PDF upload) if the cut is bigger than about 20 %. A simple revenue export or BWA is enough.

5. Hit “Prüfen & Senden”; you’ll get a confirmation PDF—keep it for your files.

Turnaround time: many tax offices reply within a week, and the new rate usually replaces the next scheduled debit automatically.

Pro tip: File reductions before the 10 March/June/Sept/Dec pull date. ELSTER shows a timestamp; if the request lands two working days ahead, most Finanzämter stop the higher debit in time.

Paper alternatives and advisor letter

Old‑school still works:

• Paper form “Antrag auf Anpassung der Vorauszahlungen”—downloadable on every state tax portal. Fill, sign, scan, email or snail‑mail.

• Free‑text letter (see template in the previous section). Use a clear subject line: “Herabsetzung Einkommensteuer‑Vorauszahlungen 2025”.

• Tax advisor route: Your Steuerberater sends a Datev “E-Postfach” message or an officially signed PDF with their professional certificate—zero extra authority needed.

Attachments that help speed approval

Heads‑up: Paper and advisor letters still end up in the same processing queue, but they need manual data entry—expect an extra week compared with ELSTER.

Bottom line: Use ELSTER for same‑day digital filing and automatic tracking; fall back to paper or have your advisor do it only when signatures or extra narrative are essential.

FAQ

What if the estimate is too low?

If your actual tax beats the prepayment, the shortfall is charged with 0.15 % / month (1.8 % p.a.) late‑interest once the final assessment is issued. You can file an upward adjustment anytime or simply make an extra transfer with the same reference line to stay ahead. 

How often can I request a change?

There’s no statutory limit; you may submit multiple “Anpassung der Vorauszahlungen” during the year. In practice the Finanzamt expects solid evidence each time and can ask questions if you ping them every quarter. Legally, even after year‑end you have 15 months (until March 2027 for the 2025 period) to tweak the numbers. 

Does the finance office refund over‑payments with interest?

Over‑paid pre‑payments are netted in the final assessment; if the refund is delayed beyond 15 months after year‑end, the Finanzamt automatically adds interest at 0.15 % per month (§ 233a AO). Interest starts and stops on the same rules that apply to Nachzahlungen. 

✍️ Keep an eye on your YTD profit, adjust early, and the “rapid‑fire” stays figurative rather than burning through your cash.

Cash‑flow tactics for founders & freelancers

Rule‑of‑thumb saving percentages

*Skip the VAT slice if you work under the small‑business clause.

📍 Feeling lazy? Round up—one‑third of gross income into a separate account covers taxes for most solo founders with room to spare.

Automating transfers to a “tax‑stash” account

1. Open a second banking sub‑account labeled “Tax Vault”. Many fintechs (e.g., Qonto, Revolut Business) let you create one in minutes.

2. Zapier / bank rule: Every time an incoming payment hits your main account, auto‑transfer your chosen percentage to the vault. Zero discipline required.

3. Lock it down: Turn off the debit card and disable outbound transfers except to the Finanzamt’s IBAN—temptation removed.

4. Quarterly sweep: As the tax due dates approach, move only what you need back to checking (or let the SEPA mandate pull directly from the vault).

Result: Your spending account always shows net‑of‑tax reality, and surprise bills become non‑events.

Founder mantra: Plan for taxes the way you plan for rent—as a fixed cost baked into every week, not a nasty shock at quarter‑end.

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