Bookkeeping in Germany:
three clocks, and none of them wait.

Christoph SchulerFounder, Business Center Reutlingen · 15+ years with Mercedes, including two years living in Bangalore · Written 29 August 2026

What a GmbH must actually do

A GmbH is a merchant by virtue of its legal form. That single fact settles most of what follows: it must keep books by double-entry bookkeeping and prepare a balance sheet and a profit and loss account under the Commercial Code. The simplified income-and-expenditure statement that freelancers and small traders may use is not available to a GmbH, whatever its size and whether or not it has traded.

This surprises founders who have been told that a dormant company costs nothing. A company with no revenue still needs a balance sheet, a corporation tax return, a trade tax return, an annual VAT return and a filing with the register. That is why our cost calculator puts a real figure on a dormant company rather than zero.

The monthly rhythm and the deadlines

Three separate clocks run, and they do not run together. Missing them is the most common way a new German company acquires penalties in its first year.

The social security timing deserves a second look, because it catches every foreign employer. Contributions are due before the month is over and before wages are paid, calculated on an estimate if necessary. A company that plans its cash around paying salaries at month end and social security afterwards has the sequence wrong.

The threshold that changes at the end of 2026

The practical consequence is worth planning around. A company formed in 2026 has been able to file quarterly where its figures allowed. A company formed in 2027, if the rule returns unchanged, would be back to twelve filings a year in each of its first two years, twenty-four returns before it has a track record, each with a deadline and a penalty attached.

That is not a reason to rush a formation. It is a reason to ask your tax advisor which regime will apply to your first two years before you agree a monthly bookkeeping fee, because the answer changes the work involved.

E-invoicing: where things stand

This is the change that catches new companies hardest, because it is already in force on the receiving side and most people only think about sending.

• Since 1 January 2025: every domestic business must be able to receive a structured electronic invoice. There is no transitional relief for this and no size exemption, it applies to small businesses under the small business scheme as well. In practice all it takes is an email address that can accept the file and a system that can read it, but "we only accept PDFs" is no longer a position you can hold.
• For 2025 and 2026 turnovers: issuers may still send other invoice formats.
• From 1 January 2027: businesses with more than 800,000 € turnover in the previous year must issue e-invoices for domestic B2B supplies.
• From 1 January 2028: all businesses must.

An e-invoice here means a structured format that a machine can process: XRechnung and ZUGFeRD from version 2.0.1 are the formats in ordinary use. A PDF is not an e-invoice, no matter how it was produced. If you are choosing accounting software for a company you are forming now, make the ability to receive and issue these formats a requirement rather than a feature you will look at later.

GoBD, and what "unchangeable" means

German tax law requires bookkeeping to be traceable, complete, correct, timely, orderly and unchangeable. The administrative rules on this are known by their abbreviation, GoBD, and they are the reason a spreadsheet is not an acceptable accounting system.

Unchangeable does not mean you may never correct a mistake. It means a change must not overwrite the original without trace: the earlier content has to remain visible and the correction has to be identifiable as one. A file that can be edited silently fails this, which is precisely the problem with a spreadsheet.

Two further requirements are routinely missed. Documents received electronically must be retained in the form in which they arrived, printing an emailed invoice and keeping the paper is not sufficient. And you are expected to hold a procedural documentation describing how your accounting process actually works: what comes in, how it is captured, where it is stored, who may change what. It is dull to write and it is asked for in an audit.

How long to keep what

This changed in 2025 and a lot of guidance still gives the old figure.

Received commercial letters and copies of those sent run for six years. Note the practical implication of the shortened voucher period: it interacts with your data protection deletion concept, so it is worth telling whoever manages that.

The small business scheme, and why it rarely fits

The rules changed on 1 January 2025 and became more generous: the thresholds are now 25,000 € turnover in the previous year and 100,000 € in the current one, and the treatment changed from "VAT is not levied" to a genuine exemption. If the 100,000 € line is crossed during the year, the exemption ends from that turnover onwards; earlier turnovers in the same year are unaffected. Since 2025 there is also an EU-wide version for cross-border turnovers.

For most companies we help form it is nonetheless the wrong choice, for two reasons that have nothing to do with the thresholds.

First, you cannot deduct input VAT. A company in its first year buying equipment, paying a notary, fitting out an office and paying professional fees is paying 19 % on all of it, and under the scheme it never gets that back. For an importing business the same applies to import VAT, which can be a substantial sum.

Second, German B2B customers read it. An invoice without VAT carries a reference to the exemption, and a purchasing department sees immediately that the supplier turns over less than 25,000 €. That is not the signal you want while establishing yourself.

The scheme suits a side business or a slow start with private customers. It rarely suits a company formed to trade with German businesses.

Annual accounts and publication

The annual accounts have to be prepared within the period set by the Commercial Code, six months after the year end for small companies, three for larger ones, and then published. Since 2022 the filing goes to the Unternehmensregister rather than the Federal Gazette, and the deadline is twelve months after the balance sheet date.

How much has to be published depends on the size class, and almost every newly formed company sits at the bottom of the scale. A micro company is one not exceeding at least two of: a balance sheet total of 450,000 €, turnover of 900,000 € and ten employees on average. A small company is one not exceeding at least two of: 7,500,000 €, 15,000,000 € and fifty employees.

The practical benefit is real: a micro company may in general deposit its balance sheet rather than publish it in full, and a small company publishes a shortened balance sheet and notes without the profit and loss account. Your competitors and customers can look you up either way, so it is worth knowing what they will see.

Failing to file is not a quiet matter. The Federal Office of Justice pursues it with administrative fine proceedings, automatically, and it does not need a complaint.

The software question

Founders ask us whether to use lexoffice, sevdesk or DATEV. It is the wrong question, and asking it in the wrong order costs money.

DATEV is not really a competitor to the other two. It is the infrastructure the German tax profession runs on, and the piece you would see as a client is DATEV Unternehmen online, where you upload documents and your advisor works on them. If your advisor proposes it, the sensible answer is usually yes.

lexoffice, now Lexware Office, and sevdesk are cloud bookkeeping tools aimed at small companies. Both do quotations, invoices, bank matching and receipt capture, both export to DATEV, and both are in the same modest price bracket. Between the two, take whichever your advisor has clients on already, because the person who has to work with the export has the better view.

Three things to check before committing, whichever you choose: that it handles e-invoice receipt and issue in the required formats, that it produces a GoBD-compliant unchangeable record and will say so in writing, and that the interface to your advisor's system is one they actually use rather than one that theoretically exists.

What none of them do is understand German tax law on your behalf. A GmbH owned from abroad has questions, the managing director's remuneration, transfer pricing with the parent, whether a payment is a distribution or an expense, that no software answers.

Who does what

A workable division for a small German company owned from abroad looks like this.

• You or your team issue invoices, capture receipts and keep the bank feed tidy. This is the part that is cheap to do yourself and expensive to hand over.
• A bookkeeper or the software posts transactions and prepares the VAT figures.
• A Steuerberater reviews, files the returns, prepares the annual accounts and handles the tax office. In Germany this is a protected profession, and giving tax advice without admission is not permitted, which is also why we do not do it and why we say so on every page.
• A payroll provider or your advisor runs wages, because the monthly reporting and the contribution deadlines are unforgiving and the penalties are automatic.

What to do, in which order

1. Appoint the tax advisor before you choose software, not after.
2. Ask which VAT filing frequency will apply to your first two years, given where the new-business rule stands.
3. Make e-invoice receipt work from day one. It has been compulsory since January 2025 and a supplier can send you one tomorrow.
4. Set up the document flow before the first invoice, where receipts land, who captures them, where they are stored, in the format they arrived in.
5. Write the procedural documentation while the process is small. Two pages now, rather than reconstructing it during an audit.
6. Put the three monthly deadlines in a calendar, the 10th for VAT and wage tax, the fifth-last and third-last banking days for social security, with a reminder for whoever is in Germany.
7. Diarise the annual accounts and the filing, twelve months after the balance sheet date. The fine proceedings are automatic.

Questions

Sources

§ 238 HGB, obligation to keep books: gesetze-im-internet.de
§ 257 HGB, retention of documents: gesetze-im-internet.de
§ 267 HGB, size classes: gesetze-im-internet.de
§ 267a HGB, micro companies: gesetze-im-internet.de
§ 325 HGB, publication of annual accounts: gesetze-im-internet.de
§ 147 AO, retention periods: gesetze-im-internet.de
§ 14 UStG, invoicing and electronic invoices: gesetze-im-internet.de
§ 18 UStG, advance returns and filing frequency: gesetze-im-internet.de
§ 19 UStG, small business scheme: gesetze-im-internet.de
§ 41a EStG, wage tax return: gesetze-im-internet.de
§ 23 SGB IV, due date of social security contributions: gesetze-im-internet.de
E-invoicing timetable and transitional rules: IHK Region Stuttgart

Business Center Reutlingen provides administrative and organisational support and introduces you to licensed professionals. We do not give legal or tax advice, in Germany only admitted lawyers (Rechtsanwälte) and tax advisors (Steuerberater) may do so.

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