The so-called actual taxation (Section 20 of the German VAT Act - UStG) represents a legal exception to the principle of debit taxation and serves, among other things, to relieve the burden of pre-financing VAT.
The VAT principle is the so-called debit taxation (Section 16 (1) UStG), which is based on the performance of the service. VAT is incurred at the end of the pre-notification period (month/quarter) in which the delivery or other service was provided. Irrespective of when the invoice is issued or the customer pays, the VAT must already be registered and paid for this pre-notification period.
In contrast, actual taxation is linked to the receipt of the payment. In this case, VAT is incurred at the end of the pre-notification period in which the payment for the service rendered is received. VAT therefore only has to be declared and paid to the tax office once the customer has paid.
Please note that the use of actual taxation is subject to application and requires approval by the tax office. Your application for actual taxation can generally be approved if one of the conditions specified in § 20 UStG is met.