What is the purpose of the invoices

The incoming invoice - explanation, relevance and formalities

Not only entrepreneurs know: where goods are traded or services are provided, the corresponding invoices are also issued. This ultimately shows what was delivered or received at what price. In this way, the entrepreneur can break down the favors he would like to be paid for, and the customer can understand exactly what he is spending his money on. Depending on whether you are the receiving or performing party, it is an incoming invoice or an outgoing invoice for you.

Table of contents

  1. Incoming invoice simply explained
  2. Relevance to sales tax
  3. Check incoming invoices correctly
  4. Mandatory information on the incoming invoice
  5. Less information for small amounts
  6. How do I deal with an incorrect incoming invoice?
  7. Reliably record incoming invoices

Incoming invoice simply explained

As the name suggests, incoming invoices are invoices that you or your company receive. It simply depends on the perspective, because in principle every invoice is an incoming invoice for one party and an outgoing invoice for the other. The incoming invoice is a document that is sent to you by suppliers or service providers whose goods or services you have used.

It should be noted, however, that the incoming invoice is not relevant for the emergence or the due date of a claim. The claim arises from the conclusion of the contract or the execution of the service or delivery of the goods. However, one of the purposes of an incoming invoice is to serve as a justification for any delay in settlement of the claims. This should mean that the supplier can prove on the basis of this information whether the recipient of the service is in arrears with the settlement of the claims.

Relevance to sales tax

An incoming invoice is also relevant for sales tax. If sales tax is shown on the incoming invoice, you as the recipient are entitled to deduct input tax in the amount of this tax. In this way, you can reduce the tax payable, the sales tax arising from your own services or deliveries. For incoming invoices - as for all other invoices with VAT relevance - a retention period of 10 years applies.

Check incoming invoices correctly

If you receive an invoice, you have to pay attention to the regulations in the Value Added Tax Act (UStG). These provisions are intended to ensure that every company correctly reports the sales tax and that the tax office will find a corresponding receipt for every income and every expenditure in the event of a review. This must meet certain formalities in order to guarantee the test security.

Mandatory information on the incoming invoice

The incoming invoice must meet certain statutory requirements. These result from paragraphs 14 and 14a UStG. This is more than just a formal requirement. Incoming invoices that do not contain this mandatory information cannot be claimed in the context of input tax. This can be more than annoying, especially with an incoming invoice for a large amount. For this reason, the following information must be included on every incoming invoice:

  • Name and address of the providing company
  • Name and address of the recipient of the service
  • bill number
  • date of issue
  • Delivery date or time of performance
  • Number of goods or type and scope of the service
  • Net amount of the invoice
  • Sales tax or reference to exemption
  • Tax number or sales tax identification number of the supplying company

In addition, information about a discount or bonus can be included, which reward the customer for a quick repayment within a specified period.

Speaking of which: a personal signature is not absolutely necessary. Only the mandatory information listed ensures the correctness of an incoming invoice.

Less information for small amounts

For smaller amounts of up to 250 euros, the mandatory information is reduced to a minimum. These include:

  • Name and address of the providing company
  • date of issue
  • Number of goods or type and scope of the service
  • Gross amount (fee including sales tax)
  • Sales tax or reference to exemption

This makes everyday business much more practicable. Further information is of course not a problem. It is also important to ensure that there are no invoices for small amounts if the company providing several invoices with amounts of less than EUR 250 for a particular service.

How do I deal with an incorrect incoming invoice?

Just as you as an entrepreneur are obliged to prepare correct invoices, so are those whose goods or services you use. In the end, perfect documents are essential for clean bookkeeping. So if an incoming invoice is incorrect, you should politely draw your business partners' attention to this and request a corresponding correction. Otherwise, you risk problems with the tax office and a higher sales tax burden.

Reliably record incoming invoices

As an entrepreneur, you are inevitably confronted with a large number of incoming invoices and it is not always easy to keep track of things. However, in order to claim input tax at the tax office, it is essential to record all invoices precisely.

But no problem at all: the practical FastBill tool will help you with this. This allows you to record invoices and receipts via smartphone in no time at all and save them conveniently and reliably in your personal inbox. And if an outstanding claim should become overdue, you will be informed immediately. You will never miss an incoming invoice and you can focus on the essentials again.

FastBill automates daily accounting processes & brings order to your invoices, receipts and finances.
Doretta works as a working student in the field of online marketing & SEO. Here she gives tips for the self-employed and small business owners: all about finance, accounting and start-ups.