Dunning fees - permissible amount and sales tax in Germany

If you provide deliveries or services as a motor vehicle entrepreneur, you usually issue an invoice to the customer. This must be paid within a certain period of time. If the customer does not pay on time, you as an entrepreneur have the right to charge the customer a reminder fee or reminder costs for the expenses incurred as a result of the reminder.

Which reminder fees are permissible?

If your customer misses payments, you have the right to charge fees or late fees. These fees may not be very high, but they compensate you for the hassle and expense of dunning. In some cases, late fees can also help motivate a customer to pay.

How high can reminder fees be?

If you decide to set late fees for your business, there are two important points to consider: 1. The fee must be reasonable for you. 2. The fee must be comprehensible and remain within a reasonable framework that covers actual expenses

If you opt for a three-stage dunning procedure, the dunning fee for the first reminder could be EUR 2.50, for the second reminder EUR 5.00 and for the third reminder EUR 7.50. These numbers are intended as a rough guide only - your actual costs (eg for postage, paper and envelopes) and the time it takes to send the invoices should always be taken into account when determining your charges.

It is customary to charge a fee of 2 to 3 euros for each dunning level. Dunning fees of this amount are not considered inadmissible. The safest choice is therefore in the middle at 2.50 euros per level.

The fee you charge must be reasonable. You should be able to make the fee understandable and keep it within a manageable range that covers your actual expenses. This way you can make sure you are justified and your customers are happy.

Dunning fees are not interest on arrears

You can add reminder fees and interest on arrears to the original invoice amount in your reminder. This applies both to dunning under civil law and to the judicial dunning procedure, in which you inform the district court of the required amount - consisting of the invoice total, default interest and of course the dunning fee of your choice.

You are relatively free to decide the amount of the reminder fee, as long as you are within a small margin. (Of course, you cannot simply choose 100.00 euros instead of 2.50 euros - that would be considered unreasonable, and it would also be difficult to justify it.) Late payment interest, on the other hand, is calculated precisely according to a fixed formula, with no leeway.

Are reminder fees subject to sales tax?

No sales tax will be added to reminder fees. When you write a reminder, you remind the original invoice total - if it is an invoice that includes sales tax, the invoice total consists of the net amount plus sales tax. The reminder fees, which also appear on your reminder, are not included in the sales tax.

Please note the following when booking:

1. The reminder fees are booked as other income and sales tax does not apply because there is no exchange of services.
2. The interest is recorded as interest income. There is no sales tax for this either.
3. The collection fees represent ancillary costs of money transactions. The offsetting entry must go to the other income account - this entry is therefore not income-neutral and therefore tax-free!

Dunning fees – short and sweet

Dunning fees are therefore real compensation payments and are therefore not subject to sales tax. The recipient of a reminder, with reminder fees on it, can also only claim the sales tax of the original invoice amount in the input tax return. The safest choice for the amount of the fee is 2.50 euros per dunning level.

You can record the dunning fees in CATAMA in the order editor in the "Dunning" area. These are displayed on the reminder under the invoice amount as reminder costs.

If you have any questions about entering reminders in CATAMA, our support always available.