Questionnaire for tax registration
October 20, 2010 | 50,00 EUR | answered by Matthias Wander
Hello dear experts,
I am currently starting my own business as a sole proprietor and I have some tax-related questions regarding the 'Questionnaire for Tax Registration':
1) Regarding the small business regulation in section 7.3:
I have already signed a contract with a customer in which I have shown value added tax (VAT) as the customer expects it and it gives a more professional impression. However, since my turnover in the first business year will be below 17,500 euros, I will fall under the small business regulation and would like to take advantage of the benefits (lower administrative burden, no input tax registrations/payments). Do I HAVE to now (because of the contract with VAT) give up the small business regulation? (with the consequence of being bound for 5 years and having to endure increased administrative burden)? Or can I still register as a small business owner and pay the VAT specified in the contract to the tax office when the customer pays? And if so, is there a specific form/ procedure for this?
2) What does 'income from self-employment' mean in section 3.1? Profit, i.e. turnover minus costs? Do I have to strictly adhere to the information in the business/financial plan?
3) What are deductible expenses in the sense of section 3.2?
4) What is a fiscal year that deviates from the calendar year in section 4 of the form? Can I choose this freely? Which option makes sense for me if I start my business in November '10?
5) What does total turnover mean in the sense of section 7.1? Profit + costs? Again, the question of whether I have to strictly adhere to the information in the business/financial plan.
6) Regarding the difference between accrual and cash basis accounting of fees in section 7.7: If I can choose freely, I assume that cash basis accounting is the more favorable option? Since I can only pay taxes once I have received payment, not when I send invoices, as a lot of time can pass until payment is made.
Dear seeker of advice,
Thank you for your inquiry, which I would like to answer based on the information you provided and in the context of your situation as part of an initial consultation.
1. If you wish to make use of the small business regulation, you must not separately show VAT on the invoice. If you do so anyway, you will owe the VAT according to § 14c paragraph 1 UStG (incorrect tax statement). Your customer is not allowed to deduct the VAT as input tax. The indication in the contract could be problematic, as the tax office could consider it as an incorrect tax statement.
If your customers are subject to VAT, it may make sense to waive the small business regulation. The VAT invoiced can be deducted by the customer as input tax. Therefore, it will be indifferent to them whether the invoice is with or without VAT. You pass on the VAT paid by the customer to the tax office (pass-through item). Your income would be the same. The advantage is that you can now deduct the input tax included in the costs as input tax, which offers you a financial advantage. The administrative effort is not so great that one should forgo the financial advantage. Additionally, you will have the same administrative effort if you invoice VAT as a small business owner, even though you are not allowed to. You will then also have to submit the VAT pre-registration and annual declaration to the tax office.
2. Income from self-employment is usually earned by freelancers (e.g. doctors, lawyers, tax advisors, etc.). If you have to register a business with the city/town, you have income from a business operation. Income is the profit. Since you have already calculated a profit in the business plan, you should transfer this to the questionnaire. Note: if you receive start-up support, the tax office will request the business plan.
3. Special expenses include contributions to your private insurances (e.g. health, pension, life insurance, etc.), church tax, donations.
4. In principle, the fiscal year is the same as the calendar year. Entrepreneurs whose company is registered in the commercial register can choose a fiscal year different from the calendar year. For entrepreneurs who determine their profit using the income-surplus calculation, a change is not possible. If you start in Nov. 2010, you will have a so-called short fiscal year from 01.11.-31.12.2010 in 2010. After that, the fiscal year = calendar year.
5. Total turnover is your income. You take this from your business plan.
6. The accrual/cash basis accounting relates to VAT. If you make use of the small business regulation, you do not need to fill out this section. Otherwise, I recommend cash basis accounting, as you correctly identified, you only pay the VAT when you have received the payment.
I hope this provides you with an initial overview.
Best regards,
Wander
Tax advisor
