Final invoice with deduction of progress payments

In the final invoice you state the entire service including VAT and deduct the progress invoices already issued – each with its net amount and the VAT attributable to it. What remains is the balance the customer still pays. German VAT law requires exactly this (Section 14 (5) UStG). Anyone who leaves out the deducted tax amounts owes the tax office the full VAT shown on the final invoice – on top of the VAT already paid on the progress invoices.

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Table of contents

1. The worked example
2. Template to copy
3. What has to be stated for each progress invoice
4. What is allowed – and what is not
5. When the progress payments exceeded the final total

The worked example

Contract value 20,000 euros net, two progress invoices of 6,000 euros net each have already been issued and paid.

The middle column is the decisive one. You have already paid the 2,280 euros of VAT from the two progress invoices to the tax office. That is precisely why they must be visibly deducted in the final invoice – otherwise it shows VAT that you owe a second time.

Template to copy

Final invoice no. 2026-078              Service period: 02/03/2026 – 19/06/2026

Total service as per contract, net                       20,000.00 EUR
plus 19 % VAT                                             3,800.00 EUR
Total gross                                              23,800.00 EUR

Less progress invoices already issued:
  Progress invoice no. 2026-014 dated 12/03/2026
      net 6,000.00 EUR    VAT 1,140.00 EUR
  Progress invoice no. 2026-031 dated 08/05/2026
      net 6,000.00 EUR    VAT 1,140.00 EUR
  Total progress invoices
      net 12,000.00 EUR   VAT 2,280.00 EUR   gross 14,280.00 EUR

Balance due                                               9,520.00 EUR
payable by 03/07/2026 without deduction

What has to be stated for each progress invoice

Every deducted progress invoice needs three details: invoice number, date and amount – net and the VAT attributable to it. A blanket line saying "less progress payments 14,280.00 €" cannot be verified, neither by your customer nor in an audit.

Apart from that, the usual mandatory invoice details apply. For construction work under the German VOB/B rules, the final invoice must also be auditable – its structure follows the bill of quantities and measurements are attached.

What is allowed – and what is not

With several progress invoices you do not have to list each one separately: it is sufficient to deduct the total of the progress payments and the sum of the tax amounts attributable to them. It is also permitted to deduct the gross totals and state the tax they contain in addition. If you show the VAT on the total service, the tax on the remaining balance does not have to be stated separately again.

What is not permitted is leaving the tax amounts out entirely. Two mistakes lead to that:

• Reducing only the net figures and charging VAT once on the whole. It looks tidy but does not meet the requirement, because the deducted tax amounts are missing.
• Mixing net and gross. Deducting gross progress payments from the net total produces an overstated amount of tax.

The consequence is the same in both cases: you owe the VAT shown on the final invoice in full, even though the progress payments have long been taxed. The only remedy is a corrected invoice to the customer – see Correcting an invoice.

When the progress payments exceeded the final total

This happens when less was delivered than planned. The deduction then produces a negative balance – the customer gets money back. That does not turn the final invoice into a credit note: you invoice as usual, show the negative amount as a refund and pay it out. You recover the VAT you overpaid through your next VAT return.

What the progress invoices before it have to look like, and when VAT on them falls due, is explained in Writing a progress invoice.

Sources: Section 14 (5) UStG · German VAT Application Decree 14.8 (invoicing for advance payments)

_This article provides general information and does not replace tax advice._