Down Payment and Final Invoice in Germany 2026: How to Bill Milestones as a Freelancer or GmbH
Writing a German down payment invoice (Anzahlungsrechnung) and reconciling the final invoice (Schlussrechnung): VAT timing, mandatory fields and bookkeeping for 2026.
- Category
- Invoicing
- Updated
- Author
- Diana
On long projects, customers usually pay in stages: a deposit upfront, the balance later. To handle VAT correctly and reconcile the final invoice cleanly, you need both a down payment invoice (Anzahlungsrechnung) and a final invoice (Schlussrechnung), two tightly coupled documents tax auditors love to scrutinise. Here is how to issue both correctly in 2026, whether you operate as a freelancer or a GmbH managing director.
Key points at a glance
- An Anzahlungsrechnung (down payment invoice) bills an agreed partial payment before the service is fully delivered. The embedded VAT becomes due the moment the money reaches your account (§ 13(1)(1)(a) UStG).
- The Schlussrechnung (final invoice) settles up after full delivery and must deduct every prior down payment, including its VAT, otherwise the customer pays VAT twice.
- Since 1 January 2025, domestic B2B businesses must be able to receive both as a structured e-invoice (XRechnung or ZUGFeRD 2.0.1 and above).
- Received down payments are booked to SKR03 1718 or SKR04 3272, with the VAT on the standard 19% VAT account.
- Kleinunternehmer under § 19 UStG show no VAT on either the down payment or the final invoice.
What is an Anzahlungsrechnung?
An Anzahlungsrechnung, a down payment invoice, is issued before you have fully delivered the service, for an agreed advance payment. Typical cases: construction, software development, wedding photography, event production, milestone-based consulting. The moment the customer pays, the embedded VAT becomes due to the tax office, even if the final delivery is months away.
The terms Anzahlungsrechnung and Abschlagsrechnung mean practically the same thing: an invoice for a partial amount before completion. "Abschlag" is common in construction and the trades, "Anzahlung" more common in services, and both are treated identically for VAT. Don't confuse this with a full prepayment invoice for the entire amount: billing 100% upfront makes it a normal invoice, not a down payment invoice. A pro-forma invoice is different again, it triggers no VAT and gives no right to input VAT.
If you are a Kleinunternehmer under § 19 UStG, you show no VAT on either invoice, and the VAT mechanics in this article do not apply to you.
| Feature | Down payment invoice | Final invoice |
|---|---|---|
| Timing | before or during delivery | after full delivery |
| Amount | agreed partial payment | total minus down payments |
| VAT | on the partial amount, due when paid | on the total, down-payment VAT deducted |
| Mandatory label | "Anzahlungs-" or "Abschlagsrechnung" | "Schlussrechnung" with a list of down payments |
| Customer input VAT | yes, with the down payment paid | yes, on the remaining balance |
Mandatory fields on a down payment invoice in 2026
A down payment invoice carries the same mandatory fields as any regular invoice under § 14 UStG: full name and address of both parties, tax number or VAT ID, invoice date, sequential invoice number, description of the service, net amount, tax rate and tax amount. See the full list of required invoice fields in Germany for the basics.
On top of that come three specifics, and without them you (or your customer) forfeit the input VAT:
- Labelled "Anzahlungsrechnung" or "Abschlagsrechnung"
- A reference to the underlying transaction, e.g. "Down payment 1 of 3" or "30% advance on project XY"
- The down payment amount and the VAT it contains shown separately
An expected delivery date also belongs on it, because at the moment of invoicing the service has not yet been rendered. Wording like "service expected in Q2 2026" is enough.
VAT becomes due immediately: the cashflow trap
Down payments fall under § 13(1)(1)(a) UStG: VAT is due in the period the money lands in your account, not when the final invoice goes out. This applies whether you use accrual (Soll) or cash (Ist) taxation, for advance payments the date of receipt always counts.
If a customer transfers €30,000 in February, you owe €4,789.92 of VAT in the February VAT return at the 19% rate (€30,000 gross, VAT extracted). You must remit that VAT even though the project may not finish until autumn and you are pre-financing wages and materials in the meantime. Plan that outflow in your liquidity planning, otherwise a seemingly positive down payment turns into a cashflow trap.
Worked example: netting down payments in the final invoice
You issue the final invoice or Schlussrechnung once the service is fully delivered. The biggest pitfall: you must deduct every prior down payment, including the VAT it contained, otherwise the customer effectively pays VAT twice and the tax office reclaims it from you under § 14c UStG.
A correct final invoice contains:
- The total net value of the service
- The full VAT on the total
- An itemised list of every down payment with date, net and VAT
- The reconciliation: remaining balance net plus residual VAT
Example: total €100,000 net, €19,000 VAT, €119,000 gross. Two down payments of €30,000 net plus €5,700 VAT each have already been invoiced and paid. In the final invoice you deduct both and bill only the remainder.
| Line | Net | VAT 19% | Gross |
|---|---|---|---|
| Total service | €100,000 | €19,000 | €119,000 |
| − Down payment 1 | −€30,000 | −€5,700 | −€35,700 |
| − Down payment 2 | −€30,000 | −€5,700 | −€35,700 |
| = Remaining balance | €40,000 | €7,600 | €47,600 |
The point: the full VAT of €19,000 appears once on the final invoice, and the €11,400 already remitted on the down payments is deducted openly. That way the customer can see they carried exactly €19,000 of VAT in total, no more.
Special case, construction: § 13b reverse charge
If you provide construction services to another construction business, the VAT is often owed not by you but by your customer, this is the reverse charge under § 13b UStG. In that case you show no VAT on either the down payment or the final invoice, only the net amount plus the note "Steuerschuldnerschaft des Leistungsempfängers" (recipient owes the tax). Show VAT anyway and you owe it on top under § 14c UStG. The checks are in our guide to the reverse charge procedure.
E-invoicing rules apply to down payments too
Since 1 January 2025 every domestic B2B business must be able to receive a structured e-invoice, XRechnung or ZUGFeRD 2.0.1 and above, and that includes both down payment and final invoices. From 2027, companies above €800,000 turnover must also send e-invoices themselves; from 2028 everyone must. A plain PDF will no longer suffice in B2B then. Tools like Norman generate XRechnung-compliant files for partial and final invoices automatically, including the correct down-payment reconciliation inside the structured data.
Bookkeeping: posting down payments correctly
A received down payment is a liability in the books, not revenue, because the service is still outstanding. That is why it does not go to the revenue account but to a separate down-payment account. Posting the down payment straight to revenue inflates turnover and distorts your management accounts.
| Transaction | SKR03 | SKR04 |
|---|---|---|
| Received, taxed down payment 19% | 1718 | 3272 |
| VAT 19% | 1776 | 3806 |
| Bank | 1200 | 1800 |
| Revenue 19% (final invoice) | 8400 | 4400 |
When the payment arrives you post bank to the down-payment account (net) and to VAT. When the final invoice is issued, the down payment is reversed: the down-payment account and the VAT posted on it are cleared against the receivable, and the full revenue then appears on the revenue account. Which chart of accounts fits you is covered in SKR03 or SKR04 for GmbH and UG.
Free invoice template (PDF, Word & Excel)
Legally compliant with all mandatory fields under §14 UStG, three formats, ready to use.
Common mistakes, and how to avoid them
- Down payments not reconciled in the final invoice. The customer pays VAT twice and you have to correct under § 14c and reissue.
- Treating a full prepayment as a down payment. Billing the full amount upfront makes it a normal invoice, so there is nothing to net.
- Forgetting to remit VAT. Once the down payment is received, the VAT goes into that month's UStVA, not later with the final invoice.
- Posting the down payment as revenue. That distorts turnover and profit; the correct home is the down-payment account 1718 or 3272.
- Showing VAT on construction work where § 13b applies. Then you owe the VAT on top.
If you need to fix an invoice, see our guide to cancelling and correcting invoices in Germany. Norman creates down payment invoices and reconciles them automatically in the final invoice, invoicing is free.
Frequently asked questions
Do I have to pay VAT on a down payment? Yes. As soon as the down payment reaches your account, the embedded VAT arises and must be declared in the VAT return for that month or quarter (§ 13(1)(1)(a) UStG).
What is the difference between an Abschlagsrechnung and an Anzahlungsrechnung? None for VAT. "Abschlagsrechnung" is common in construction and the trades, "Anzahlungsrechnung" more in services. Both bill a partial amount before completion and trigger the same VAT obligation.
Does the final invoice have to list every down payment? Yes. Every prior down payment must appear in the final invoice with date, net amount and VAT, and be deducted openly. Without the list, the customer's input VAT deduction is at risk.
What happens if I forget the down payment in the final invoice? You then show the full VAT twice, once on the down payments and once on the uncut final invoice. The customer pays VAT twice, and you owe the over-stated amount under § 14c UStG until you correct the invoice.
Is a down payment invoice mandatory? No, you are not obliged to agree down payments. But if you bill an advance payment, the document must meet all mandatory fields, otherwise your customer cannot claim the input VAT.
Do the e-invoicing rules apply to down payment invoices too? Yes. In domestic B2B, the e-invoicing rules have applied to all invoices since 2025, including down payment and final invoices.
Conclusion
Down payment and final invoices are not a footnote, they shape your cashflow and your VAT exposure. Get the timing of the VAT right, reconcile cleanly in the final invoice and you avoid double-payments and correction filings. With a tool that nets prior down payments automatically and books them correctly, you skip the spreadsheet acrobatics entirely.
Net down payments into the final invoice automatically
Norman issues both down payment and final invoices as XRechnung or ZUGFeRD, deducts every paid down payment and its VAT from the final invoice automatically, and books it to the right account. No double VAT, no spreadsheet netting. Invoicing with Norman is free.