How prepayments are set
The tax office uses prior assessments or forecasts to set instalments for income tax and, where relevant, trade tax. VAT follows its own advance-return system.
When to request an adjustment
If current profit is materially lower or higher, update the forecast with credible figures. Lowering instalments without evidence can merely postpone the bill.
- Current bookkeeping report.
- Expected annual revenue and costs.
- One-off events separated.
- Cash reserved for the final assessment.
The second-year effect
A first assessment can trigger tax for the past year, current-year catch-up instalments and higher future prepayments close together. Plan for that before spending apparent account balances.
Frequently asked
Are prepayments optional?
No, not once validly assessed, though the amount can be reviewed.
Can I reduce them when business slows?
Yes, with a reasonable current forecast and request.
Do prepayments replace the annual return?
No. The annual assessment reconciles the final liability with amounts already paid.
This guide is general information on German tax law, not advice on your individual case. Rules and figures change with each tax year.