Reminder system in tax law

Definition of reminder

The term reminder is a request for payment from a creditor to his debtor. The clear and specific reminder to pay the invoice amount for a service provided is the primary goal of a reminder.

It often happens that customers hesitate to pay bills on the agreed payment term. For this reason, a company cannot completely do without a corresponding dunning system or reminder in general.

Regulations, laws and legal bases regarding reminders

There are minimum requirements for reminders so that they have legal validity. This also applies to invoices. These are regulated in Section 14, Paragraph 4 of the Value Added Tax Act (UStG). In a judgment by the Waiblingen Labor Court, see order of November 10, 2003, 14 C 1737/03, a decision was made on the consequences of an incomplete document and an incorrect invoice. In addition, a large number of laws, resolutions and judgments are available, which regulate the legal basis of a reminder:

  • In Section 286 of the German Civil Code (BGB) the prerequisites for an existing delay are set out in more detail
  • The requirement that a private debtor must be dunned once in each case is illustrated by the example of the BGH judgment III ZR 91/07 of 25.10.2007
  • Sections 194, 195 and 199 of the German Civil Code stipulate that the standard statute of limitations is three years
  • The judicial dunning procedure is regulated in §§ 688 ff. Of the Code of Civil Procedure (ZPO)

To combat late payment in business transactions, a law was also passed on July 29, 2014 (see Federal Law Gazette 2014 I p. 1218). This law applies to all general terms and conditions and contracts concluded after July 28, 2014. The law also implements European Directive 2011/7 / EU, which was passed on February 16, 2011. The new law can also be applied to continuing obligations. This affects, for example, electricity supply contracts, the payment of which was made before the law came into force. Since then, the following has also been regulated by law for companies:

  • In the event of default, a reminder fee of at least 9 % above the base rate must be paid in the future.
  • In addition, a processing fee of € 40 is due in accordance with Section 288 (5) of the German Civil Code (BGB).

For what period of time can you charge interest on arrears? The late days are counted from the first day after the due date of the invoice (the due date is not counted as a day of default) until the day of the invoice payment (this is counted as a default day).

According to LAG Cologne, judgment v. 11/22/2016, 12 Sa 524/16, ZIP 2017 p. 100, these conditions also apply in the event that an employer pays the employee's salary late.

Purpose and importance of the dunning procedure

It is of essential importance that a company has its own dunning system. Otherwise there is no guarantee that reminders, in which debtors are requested to make payments that have not yet been made, will be sent to the debtor in a timely manner. Often the liquidity a company's limited by unpaid money requests.

The “worst case” is when companies have to take out loans due to unpaid invoices in order to be able to pay their suppliers on time. In addition, very large payment defaults can seriously endanger your own operations.

It even goes as far as an existing one insolvency can threaten. The dunning system therefore has the primary task of tracking the payments to which your company is entitled based on services rendered and trying to collect them on time.