Advance payment invoices in Germany: templates, required details and VAT

You only get money before you deliver if you agree it beforehand. No German law grants you a right to payment up front. Once it is agreed, you write an ordinary invoice with all the required details – templates are further down. The expensive part comes next: German VAT arises the moment the money reaches your account, even though you have delivered nothing yet (§ 13 (1) no. 1 (a) sentence 4 UStG). And if you later fail to deduct the deposit visibly in the final invoice, you owe the tax twice.

This article is general information and does not replace legal or tax advice. If you are unsure about your own case, ask your tax adviser or a lawyer.

Contents

1. May I ask for money up front at all?
2. Prepayment or deposit: the difference
3. Templates for deposit and prepayment invoices
4. These details are mandatory
5. VAT does not wait for delivery
6. The final invoice: where the double tax appears
7. What applies to small businesses
8. How high may the deposit be?
9. Prepayment in your terms and conditions: the delicate part
10. The job falls through: refund and invoice correction
11. Wording for quotes and invoices
12. Frequently asked questions

May I ask for money up front at all?

Yes, if you agree it with the customer. No, if you simply write it on the invoice.

That difference matters more than it sounds. As a rule, German law expects you to perform first and the customer to pay afterwards. For contracts for work, § 632a BGB puts it plainly: you may demand an interim payment "in the amount of the value of the services rendered by him and owed under the contract". The key word is rendered. The statutory claim only covers what you have already done – not what you still intend to do.

Money before performance is therefore not a right you hold, but a term you negotiate. And because it is a term, it belongs where the customer can still say no: in the quote, in the order confirmation, in the contract. Not on the invoice that follows afterwards.

The most common mistake in practice: a quote that says nothing about payment, the order is placed, and then the invoice arrives demanding "50% deposit before work begins". The customer does not have to go along with it. You never agreed the deposit, so you owe the work and the money is due only afterwards.

Prepayment or deposit: the difference

Both mean money before performance. The difference lies in the amount and in what still follows.

For VAT purposes the law treats both the same. § 13 (1) no. 1 (a) sentence 4 UStG speaks of "consideration or part of the consideration" collected before the supply has been carried out. Whether that is 100 per cent or 30 per cent makes no difference.

In practice they still differ. With prepayment you are done once you have delivered. With a deposit a final invoice follows, and that is exactly where the most expensive mistake in this topic happens – see The final invoice.

An interim invoice is not the same thing. It bills what you have already delivered on an ongoing job, step by step. Deposits and prepayments arrive before anything has happened at all. How ongoing partial billing works is covered in Writing an interim invoice, and the distinction between the three invoice types in Interim, partial and final invoices. A pro forma invoice is another thing again: it settles nothing at all, it informs customs or the customer in advance.

Templates for deposit and prepayment invoices

Two templates to copy. The figures are examples; the structure is what matters.

Deposit invoice template

Deposit invoice no. 2026-0184
Invoice date: 15 September 2026

For the order dated 8 September 2026: fitting of a kitchen, order number A-2026-31.
Expected performance period: October 2026.

Agreed deposit, 30% of the order total of EUR 12,000.00 net:

| Item | Net | VAT 19% | Gross |
| --- | --- | --- | --- |
| Deposit on order A-2026-31 | EUR 3,600.00 | EUR 684.00 | EUR 4,284.00 |

Payable by 25 September 2026 without deduction.
We will begin fitting once the deposit has been received.
You will receive a final invoice for the remaining amount after completion, in which this deposit will be deducted.

Prepayment invoice template

Invoice no. 2026-0185 – payment before dispatch
Invoice date: 15 September 2026

For your order dated 14 September 2026.
Expected month of delivery: September 2026.

| Item | Qty | Net | VAT 19% | Gross |
| --- | --- | --- | --- | --- |
| Item 4411, custom-made | 1 | EUR 890.00 | EUR 169.10 | EUR 1,059.10 |

Payable by 22 September 2026 without deduction.
Dispatch follows once the amount has been received.

The same template serves anyone looking for a deposit invoice "sample", "form" or "pro forma" – it is the same document in every case. Only the occasion changes.

A word on the heading: the law prescribes no title. "Deposit invoice", "advance payment invoice" or simply "invoice" are all permissible. What matters is that the document makes clear the supply has not yet been made. Otherwise it is hard to explain later why two invoices exist for one job.

These details are mandatory

A deposit invoice is not a stripped-down invoice. § 14 (5) sentence 1 UStG states that where consideration is collected before the supply, "subsections 1 to 4 apply accordingly". The same mandatory details apply as for any other invoice under § 14 (4) UStG.

Two points cause trouble in practice:

The time of supply. You do not know it yet – the supply is still to come. Stating the expected date or the calendar month is enough. Leave the field empty, however, and a mandatory detail is missing.

The description of the supply. It must be specific enough to show what is being paid for. "Deposit" on its own is not enough. "Deposit on order A-2026-31, fitting of a kitchen" is. This is not a formality: only once it is clear what will be supplied can the correct tax rate be determined.

The full list of mandatory details is set out in Writing an invoice. Nothing special applies to sequential numbering: the deposit invoice takes a number from your normal series, see Assigning invoice numbers.

VAT does not wait for delivery

This is the point where deposits differ from everything else, and the reason many self-employed people come unstuck with them once.

Normally German VAT arises when you have delivered or performed. Where money arrives before performance, a special rule applies: under § 13 (1) no. 1 (a) sentence 4 UStG the tax arises "at the end of the pre-registration period in which the consideration or part of the consideration was collected".

Collected means the money is in your account. Not: you have issued the invoice.

An example. On 25 September you receive a deposit of EUR 4,284.00 gross. The kitchen is fitted in November. In the pre-registration for September you nonetheless declare and pay EUR 684.00 of VAT. At that point the job has not even started.

This applies whether you account for VAT on agreed or on collected consideration. Anyone using cash accounting under § 20 UStG already has receipt of money as the trigger. Anyone on accrual accounting is pulled forward to receipt by sentence 4. Either way the money is with the tax office before the work is done.

What follows from this, very practically: set the VAT from the deposit aside the moment it arrives. Anyone budgeting EUR 4,284.00 for materials and wages has already spent EUR 684.00 of it without noticing. The pre-registration deadlines are covered in VAT pre-registration: deadlines and thresholds.

The final invoice: where the double tax appears

The kitchen is fitted, you issue the final invoice for the full order total and show VAT on it. Done? No – you now owe the tax from the deposit a second time.

§ 14 (5) sentence 2 UStG requires the closing invoice to deduct "the partial consideration collected before the supply or other service was carried out and the tax amounts attributable to it". Both. Not just the net figure but the tax as well, and both visibly.

If the final invoice shows full tax on the full amount, you have declared more tax than you owe. You then owe that excess under § 14c (1) UStG – on top of what you already paid in September.

This is what the deduction looks like when done right:

The alternative: issue the final invoice for the remaining amount only and refer to the deposit invoice. That is equally permissible. What does not work is the full amount with full tax and no mention of the deposit at all.

With pure prepayment the problem disappears. You billed the full amount once; there is no second invoice. That is precisely why so many people search for "prepayment without final invoice": it is not a special case, it is how prepayment normally works.

What applies to small businesses

Anyone using the small business scheme under § 19 UStG shows no VAT. That applies to a deposit invoice as much as to any other. The two traps from the previous sections therefore fall away: no tax on receipt, no double tax in the final invoice.

Two things still deserve attention:

The deposit counts towards the turnover threshold. It is turnover as soon as it arrives, even if the supply follows next year. Anyone sitting just below the threshold who accepts a large deposit in December can push themselves over it. The thresholds and their effect are covered in The small business scheme.

The notice belongs on the invoice. The deposit invoice carries the same sentence as any other, stating that no VAT is charged under § 19 UStG. Wording for this is in Invoicing without VAT.

How high may the deposit be?

There is no general statutory ceiling. What you may agree depends on how you agree it and with whom.

In an individually negotiated contract you are free. 30 per cent, 50 per cent or the full amount: if both sides agree, it stands.

In a consumer construction contract the law sets a limit. Under § 650m (1) BGB, interim payments together may not exceed 90 per cent of the agreed total remuneration. § 650m (2) BGB adds that on the first interim payment the consumer must be given "security for timely completion of the work free of material defects in the amount of 5 per cent of the agreed total remuneration". These provisions apply to contracts with a consumer for building a new property or for substantial conversion work. Whether your job falls under them turns on the individual case – for larger building work for private customers it is worth asking a lawyer.

In your standard terms it becomes delicate regardless of the amount. See the next section.

Beyond the law, the trade decides. For custom work and materials you have to buy in, 30 to 50 per cent is common. For standard goods sold to regular customers, even a deposit can read as a vote of no confidence. The line that settles both: the deposit covers your exposure, not your profit.

Prepayment in your terms and conditions: the delicate part

A clause in your standard terms obliging the customer to pay before performance is measured against § 307 BGB. And there it runs into difficulty, because the law assumes the opposite order.

On 7 March 2013 the German Federal Court of Justice held a kitchen supplier's clause invalid, under which the purchase price was payable "at the latest upon delivery without deduction" (BGH, judgment of 07/03/2013 – VII ZR 162/12). The reasoning: the clause obliges the customer to perform first, without being able to inspect what he gets in return.

It is important to see what this does not mean. Offering prepayment as one of several payment methods the customer chooses between is a different matter from a clause that imposes advance performance on him. And in an individually negotiated contract what the two sides agreed applies anyway.

Where exactly the line runs depends on the wording and the business model. That is lawyer's territory, not a guide topic: if you want prepayment written firmly into your terms, have the clause checked before the first warning letter arrives. For an agreement in the individual case – quote, order confirmation, signed contract – you do not need that.

The job falls through: refund and invoice correction

The customer pulls out, you refund the deposit. Commercially that settles it; for tax purposes it does not.

You have already paid the VAT on the deposit. You can recover it under § 17 (2) no. 2 UStG: the correction rule applies accordingly where "consideration has been paid for an agreed supply or other service, but the supply or other service has not been carried out". The correction belongs in the pre-registration period in which you repaid the money – not retroactively in the one in which it arrived.

A correction of the deposit invoice goes with it. What that looks like formally is covered in Correcting an invoice.

If you are entitled to keep the money, for instance as an agreed cancellation fee, the position is different. It then has to be settled whether the retained amount is genuine damages or consideration for a supply – and that determines whether VAT applies to it. This distinction turns on the individual case, and it regularly goes wrong when people make the call themselves. Ask your tax adviser here.

A special case: withdrawal in distance selling. If a consumer orders online and pays in advance, they generally have fourteen days to withdraw. If they do, you must refund the full amount including standard delivery costs. Prepayment therefore protects you against non-payment, not against withdrawal.

Wording for quotes and invoices

Four sentences you can adopt. The decisive one belongs in the quote, not on the invoice.

In the quote or order confirmation:

Payment terms: 30% of the order total falls due before work begins, the remainder within 14 days of acceptance without deduction.

For full prepayment:

Payment term: payment before dispatch. We ship once the invoice amount has been received.

On the deposit invoice:

This invoice concerns an agreed deposit. The supply has not yet been made. You will receive a final invoice for the remaining amount after completion, in which this deposit will be deducted.

On the final invoice:

Less deposit invoice no. 2026-0184 of 15/09/2026: EUR 3,600.00 net, EUR 684.00 VAT.

A note on terminology: "prepayment" and "payment in advance" mean the same thing and both are common. "Advance payment" is the term tax law uses. Stick to one word within a single document, or it will look as though you mean different things.

If you would rather not retype payment terms on every invoice, store them once in your invoicing software; the due date then appears on the document as a specific date, instead of wording the customer has to work out for himself.

Frequently asked questions

May I demand prepayment if the quote says nothing about it?

No. Without an agreement the statutory order stands: you perform, then the customer pays. You can ask afterwards whether he will pay a deposit, but you cannot demand it.

Do I have to issue an invoice for the deposit?

For your business customer's input tax deduction, yes. He may only deduct the tax from the deposit under § 15 (1) sentence 1 no. 1 UStG once "the invoice is available and the payment has been made". Without an invoice, half the requirement is missing. You, on the other hand, must pay the VAT regardless of whether you have issued an invoice – it is triggered by receipt of the money.

When may I chase an unpaid deposit?

Once the agreed date has passed, the deposit is treated like any other receivable. The deadlines and the procedure are in Payment terms on the invoice and Writing a payment reminder. The simpler route is usually not to start the work – your leverage is the performance still outstanding.

How do I post a deposit received?

Deposits received do not run through the ordinary revenue account but through a separate account for payments received on account; the VAT on them is recorded separately. Which account number that is in your chart of accounts, and how the release is posted when the final invoice is issued, is a question for your tax adviser. Guessing figures here costs more time later than the question is worth.

Does the deposit count in the year it arrives under cash-basis accounting?

Under the cash-basis profit statement the receipts-and-payments principle of § 11 EStG applies: what is in the account counts as received. A deposit arriving in December therefore belongs to the old year, even if the supply is made in the new one. How the statement works overall is covered in Preparing a cash-basis profit statement.

Can I ask for prepayment and still offer an early payment discount?

Technically yes, commercially rarely sensible. An early payment discount is the price of early payment – with prepayment the customer pays first anyway. What the discount actually costs is set out in Early payment discounts on the invoice.

Anyone using deposits regularly mainly needs an overview of which amounts are still outstanding against a final invoice. Try Easy Invoice for free – payment terms are stored there as templates, and open items appear as at your chosen date.

Sources

• § 13 UStG – When the tax arises
• § 14 UStG – Issuing invoices
• § 14c UStG – Incorrect or unauthorised statement of tax
• § 15 UStG – Input tax deduction
• § 17 UStG – Change of the taxable amount
• § 19 UStG – Taxation of small businesses
• § 20 UStG – Calculating tax on collected consideration
• § 632a BGB – Interim payments
• § 650m BGB – Interim payments; securing the remuneration claim
• § 307 BGB – Review of contract terms
• § 11 EStG – Receipts and payments
• § 355 BGB – Right of withdrawal in consumer contracts
• BGH, judgment of 07/03/2013 – VII ZR 162/12