Code number 500: The new signal for greater transparency from 2026?

Since 2017, the advance VAT return has provided for a small but effective tool for informing the tax office that “there is more to this than just a number.” At that time, the core idea was automation assessment (keyword: machine processing according to the German General Tax Code (“AO”); with exceptions if the taxpayer sees reason for personal processing by an official; Arts. 150 (7), 155 (4), 88 (5) AO). 

From 2026 onwards, this principle will not be abolished – it will mature: the tax authorities no longer want to hear that something needs to be explained, but why. And yes, this will lead to a more controversial presentation, because under the same “additional information” banner, there will now be different types of facts and different “messages” to the tax office, which may also be relevant under criminal tax law.

And this can certainly be understood with a wink as an “editorial adjustment” on the part of the German Ministry of Finance (“BMF”). The BMF has yet to provide an explanation for the differentiated introduction of code number 500.

1. What exactly is code 500 – and what is it not?

Starting in 2026, code 500 (line 55) will be the section where you signal to the tax office: “Please don't just automatically rubber-stamp this part – additional context is required.” It does not replace the technically correct declaration but supplements it where figures without accompanying text could lead to misinterpretation. Think of it like a road sign: it does not replace the road, but it prevents someone from turning in the wrong direction at 100 km/h in foggy conditions.

And now for the part that most often goes wrong in practice: code 500 is not the new “I'll attach everything just to be on the safe side” button. Simply submitting receipts or lists without providing any additional information that is relevant for tax purposes does not usually improve processing – it just increases the amount of data.

The joke is: With code 500, the tax office probably no longer wants “document packages,” but rather a targeted, content-based classification. Anyone who uses code 500 is essentially saying, “Please have an officer personally check this part,” and that should not be triggered reflexively.

2. Why will it be more “controversial” from 2026 onwards – and why is this not just bureaucratic folklore?

Until now, the message has often been binary: “There is something to be taken into account, details in the appendix.” Starting in 2026, you will also have to decide what type of “something” is involved. This is not just cosmetic, but influences how a transaction is perceived by the tax office: “Reportable facts not yet complete” is a different tone than “deliberately deviating legal opinion.” And “everything correct, but unusual” is something else again—more verification than dispute.

This leads to more “controversy” in the sense that you have to decide whether it is a pending/data case, a legal position case, or an anomaly/plausibility case. This makes code number 500 a tool that controls communication – and not just transmits information. Using it properly can reduce queries; using it improperly triggers, in case of doubt, exactly the audit the taxpayer wanted to avoid or even creates risks under criminal tax law.

This is because the Federal Court of Justice (BGH) developed guidelines back in 1999 as to when a taxpayer’s declarations cross the line of what is permissible. The offense under Art. 370(1)(1) AO consists of providing the tax authorities with incorrect or incomplete information on facts relevant to taxation. In this context, it was and is permissible to take a position that is favorable to oneself, which may also deviate from the tax authorities’ legal opinion. However, a deviating legal opinion is often accompanied by a selective presentation of the actual information in the tax return. Therefore, in the BGH’s opinion, there is a duty of disclosure for those elements of the facts whose tax relevance is objectively doubtful. This is the case if a taxpayer’s legal opinion deviates from the legal opinion of case law, the tax authorities’ guidelines, or regular assessment practice (see Federal Court of Justice, judgment of November 10, 1999, 5 StR 221/99). If a taxpayer holds a legal opinion that deviates from this standard, they must provide the tax authorities with the facts necessary for a deviating legal opinion. It is therefore important to carefully consider when and what information will (or must) be provided under code number 500.

In short: code number 500 is like a “Please knock” door sign—but you shouldn't hang it on every door just because you like signs.

3. The three (plus one) categories – with examples for differentiation

In the absence of an explanation from the German Federal Ministry of Finance (“BMF”), it is necessary to consider which cases are covered by the newly created code number 500.

3.1 Code number 500 = 1: “Taxable circumstances could not (yet) be declared.”

In our opinion, this category is intended for cases in which the transaction is definitely relevant for the reporting period, but it is objectively impossible to submit a complete, final declaration by the deadline. This may be due, for example, to missing final statements, unfinished assessment bases, or technical allocation problems.
It is important to note that this is not intended for cases where some documents are still in the inbox and the taxpayer just had no time to look at them yet, but rather for cases where the relevant tax return’s contents cannot yet be fully reported.

• Example 1: Reverse charge (Art. 13b UStG (German VAT Act)) – Service provided, but no invoice / assessment basis still unclear
  You know that the service was performed during the month and that the tax liability generally arises. However, you do not know whether the assessment basis will ultimately be EUR 10,000 or EUR 14,500. In the VAT return, you can (and must) work on an accrual basis, often on the basis of a contract, proof of performance, a timesheet, list of quantities, or a reliable estimate. This is exactly where code 500 = 1 comes in: you declare that the final assessment basis is still to follow and that a correction will be made after the invoice has been received. The (mild) sarcasm here is that the tax office loves surprises about as much as a taxpayer loves late queries – which is why transparency is actually your friend in this regard. This is also important in terms of avoiding criminal tax risks. If you submit a tax return knowing that it is incomplete without pointing out that tax-relevant information is missing, thereby suggesting that it is complete, you are generally acting intentionally.
• Example 2: Bulk credits/returns at the end of the period – allocation to tax rates not yet finalized
  If it is clear that there were reductions in remuneration during the period, but the clear division into 19%/7%/tax-exempt sales can only be completed in terms of technology and content after the filing deadline, the declaration is not yet “complete.” A flat-rate estimation without any indication may later appear to be an error, even though it is merely a matter of demarcation. Code number 500 = 1 with attachment creates the right expectation: “The figures are provisional, correction will follow in a structured manner.” This is not a weakness, but a clearly documented process.
• Example 3: System/ERP conversion – tax codes not fully mapped
  If a system change means that certain VAT issues (e.g., special tax codes, adjustment logic, special codes) cannot be correctly reflected in the VAT advance return, the return is objectively incomplete at the time of submission. In this case, code 500 = 1 is appropriate because you are not acting in a “legally deviant” manner, but simply cannot yet provide a complete declaration. The annex must then specify the amounts, the codes concerned (as far as possible), and the plan for prompt correction. The advantage: the tax return’s figures do not appear as a chaotic mess, instead, you provide a comprehensible cause.

Important demarcation criterion:
If you actually have all the data and it's just that “the invoice doesn't look nice yet,” this is not a case for (1). (1) is for genuine incomplete declarations, not for aesthetics or document retention periods. On the contrary, if you use (1) for this purpose, you create, in the worst case, a risk of criminal tax liability.

(2) Code number 500 = 2: Deliberately divergent legal opinion

In this context, the focus is not on missing figures, but on a deliberate legal classification that may deviate from the typical administrative interpretation or is at least controversial. This may be a different classification (delivery/other service), a tax exemption, a place of performance, a tax rate, or an input tax allocation.

The essential point is that you do not say “we don't know yet,” but rather “we know – and justify it as follows.” Thus, you meet the requirements set by the Federal Court of Justice for taxpayers' reporting behavior and do not leave yourself open to attack.

• Example 1: Intra-Community supply – Tax exemption is already declared, even though the VAT ID number was not (yet) available at the time of delivery.
  If you claim tax exemption in your VAT return despite not having a VAT ID number, this is generally a conscious risk. In that case, you are relying on your status as an entrepreneur and other evidence/proof, even though the formal requirements have not yet been fully met or will only be submitted later. This may be justifiable; however, you must be aware that it is not “just a data problem,” but a legal decision requiring explanation. In this case, code number 500 = 2 is the correct classification because you openly inform the tax office: “We declare tax exemption and will submit the formal evidence later; we consider the material requirements to be fulfilled.”
• Example 2: Distinction between delivery and other services in project business / plant engineering /complex IT services.
  Particularly in the case of bundled services, the classification leads to different consequences (place of performance, tax liability, reverse charge if applicable). If you consciously opt for a uniform service or a specific classification, even though another classification might be more obvious, this is a classic case for code 500 = 2. The appendix should briefly explain why the chosen approach is appropriate (e.g., main service, ancillary services, contract and billing structure). Without such explanation, the declaration often appears “unusual,” even though it is technically well-founded. It is important to provide the tax office with all tax-relevant facts, thus enabling it to make a different assessment if necessary.
• Example 3: Input tax allocation (Art. 15 (4) UStG) – deliberately chosen method.
  If input tax amounts are allocated according to a specific criterion (sales key, area key, hours of use, property-related allocation, if applicable) and this is not the tax administration’s “standard expectation”, this is a legal/methodological position. Code 500 = 2 is then appropriate because you are not arguing about figures, but are representing a conscious allocation logic. The method should be briefly described in the appendix and the impact on the input tax claimed should be quantified. This reduces the risk of the tax administration simply assuming that the estimate is incorrect or arbitrary.

(3) Code number 500 = 3: In-depth review by personnel desired/required

This category is the “Everything is correct, but without explanation it looks like an accident” pigeonhole. In our opinion, this mainly concerns noticeable deviations, special effects, or structural jumps that have been fully explained but typically trigger queries or audit comments without context. Code 500 = 3 is used to speed up processing because it answers the obvious questions in advance.

• Example 1: High input tax surplus due to a one-time investment.
  A large asset, a real property, or an extensive project service can generate an input tax surplus that is “out of the ordinary” compared to previous periods. The VAT return is correct, but without an explanation, the refund amount seems like a red flag. Code 500 = 3 and a brief explanation (“one-time investment, supplier/service period, planned business use, no recurring use”) can reduce queries. It's less of a “Please check me!” and more of a “Please check briefly and understand immediately what’s behind such figure.”
• Example 2: Unusual jump in sales due to one-time order / final invoice / additional charges.
  When a month suddenly shows sales that would normally fill a quarter, tax authorities want to know whether this is a one-off occurrence or a structural change. You can use code 500 = 3 to briefly explain that this is a one-off effect (e.g., project completion, special delivery, final invoice). This is not a legal dispute or an omission – it is plausibility. The sarcastic part: you don't explain the facts because you've made a mistake, but because numbers without context sometimes seem as if there is a story behind them.
• Example 3: Correction waves / collective corrections that make the figures appear “skewed.”
  If many adjustments, invoice corrections, or period adjustments coincide within a given period, the VAT return may be mathematically correct but appear “implausible” from a processing perspective. Code 500 = 3 is then a pragmatic decision to explain the cause (e.g., systematic error detected and corrected, collective credits, subsequent accrual). This prevents the tax administration from having to make several inquiries to find out what you could already clearly explain in two paragraphs. This is often the most economical form of communication and ensures maximum transparency, so that your tax return is also “self-disclosure-proof” in the worst case.

4. Practical decision rule – so that code number 500 does not become a “permanent check mark”

If you need a quick guideline, it can be summarized as follows:

1.  if you cannot yet file an objectively complete return, 
2.  if you are consciously taking a legal position, 
3.  if everything is correct but seems conspicuous without context.

This classification should be handled as uniformly as possible, because inconsistent use (sometimes yes, sometimes no, sometimes wrong category) tends to generate queries. It is also important that the structure of the annex always remains the same: facts – amounts – relevant codes – classification – follow-up action.

And yes: “always checking the code 500 box just to be on the safe side” will ultimately achieve exactly the opposite of safety. In this case, the signal is not “the return includes special circumstances,” but “everything is always special here” – and that is about as convincing as a test fire alarm that goes off every Tuesday at 11 a.m.

In case of any questions, please feel free to contact us.