German accounting has a reputation — and it's earned. The Commercial Code (HGB) regulates financial statements down to the detail, the GoBD rules even dictate how you may store receipts digitally, and the tax office audits mercilessly. The good news: for most founders, the topic boils down to a manageable handful of obligations. Here's the overview that actually matters.
Who has to keep books, and how?
The first fork in the road: single-entry or double-entry bookkeeping?
| Company form | Bookkeeping | Year-end | |---|---|---| | Freelancers | cash-basis (EÜR) | informal profit calculation | | Sole proprietorship/GbR (small)* | cash-basis (EÜR) | informal profit calculation | | Registered merchant (large) | double-entry | balance sheet + P&L | | GmbH, UG, AG | double-entry (always!) | balance sheet + P&L + notes |
*Small = up to €800,000 revenue and €80,000 profit per year. Above that, the tax office orders balance sheet accounting.
Corporations like the GmbH and UG always prepare balance sheets — regardless of size.
The rulebook: HGB and GoBD
HGB (Commercial Code): The core of German financial reporting. It requires the books to give a "true and fair view" of the company's position — guided by the prudence principle: recognize losses early, profits only when realized.
GoBD: The administrative rules for digital bookkeeping. Key points: records must be archived unalterably, completely, and traceably. A spreadsheet doesn't qualify — GoBD-compliant accounting software or a tax advisor does.
Retention: 10 years for records and financial statements, 6 years for business letters.
IFRS instead of HGB? Only capital-market-oriented groups must apply IFRS (in consolidated statements). SMEs stay with the HGB — which is why international subsidiaries often run both standards in parallel.
The tax rates to calculate with
- Corporate income tax: 15% plus a 5.5% solidarity surcharge on top (effectively ~15.8%)
- Trade tax: roughly 14–17% depending on the municipality — together, corporations land at around 30% total burden
- VAT: 19% standard, 7% reduced — deadlines and advance returns in our VAT guide
The annual rhythm of bookkeeping
- Ongoing: capture receipts, issue invoices per §14 UStG, reconcile accounts
- Monthly/quarterly: VAT advance return (10th of the following month), payroll if applicable
- Annually: financial statements (6 months after fiscal year end), disclosure in the company register (12 months), tax returns
The deadlines and the consequences of missing them are in our compliance checklist.
Audit requirement: who does it hit?
Small companies are audit-exempt. The statutory audit by a certified auditor kicks in when two of three criteria are exceeded on two consecutive reporting dates: €7.5m balance sheet total, €15m revenue, 50 employees. Startups can safely postpone this topic.
DIY, software, or tax advisor?
DIY + software (from ~€10–30/month): works for freelancers and simple cash-basis cases with few receipts.
Tax advisor (from ~€100–300/month for small GmbHs): practically unavoidable once balance sheet accounting applies — doing the annual statements and corporate tax return yourself is a liability risk.
Digitally outsourced: Clevver's Tax & Accounting service handles bookkeeping, advance returns, and annual statements — for foreign founders without a German tax advisor contact, the simplest path.
FAQ
Can I keep my books in English? Receipts may be in English, but the tax office can demand translations. Financial statements and tax returns run in German — another reason for local support.
What happens with bookkeeping errors? Anything from late surcharges through estimated assessments by the tax office up to the managing director's personal liability — and criminal consequences in cases of intent.
Does my foreign company with a German branch need German bookkeeping? Yes — permanent establishments and branches are subject to German accounting and tax obligations. Details in our guide Branch or subsidiary in Germany.
Cash-basis or balance sheet — which is better? If you get to choose: cash-basis is simpler and cheaper. The balance sheet delivers better management information and banks prefer it.