Small business regulation as escort
August 28, 2013 | 40,00 EUR | answered by Dr. Yanqiong Bolik
Dear Dr. Bolik,
You have already answered a question from an escort lady, so I am reaching out to you:
I started working as an escort in May/June, and in July I registered my business as a 'model, promotion, and trade fair hostess' (would it be better to register directly as an escort? or are there disadvantages to that?). Now I have to indicate in a questionnaire from the tax office whether I want to apply the small business regulation or not.
Now to my question: what happens if I apply the small business regulation and then in the first year (possibly significantly) exceed the turnover of €17,500? Would I have to pay the VAT back in full? (If I issue invoices as a small business, I would only receive the amount without VAT)
Do you generally recommend the small business regulation?
I also had a lot of expenses due to new purchases to have a good start in the high-class sector. With the small business regulation, would I then 'lose' the VAT from these expenses, but on the other hand, would I not have to pay VAT on my income?
Thank you for your answer!
Dear questioner,
Thank you for your inquiry, which I am happy to answer while taking into account your commitment and the rules of this platform.
Please note that my explanation is based on the information provided, and that adding, omitting, changing the information, or the ambiguity of the information can change the tax result. Please be aware that this does not replace individual comprehensive advice.
For the application of the small business regulation, the following applies: If the entrepreneur starts his commercial or professional activity during a calendar year (in the year of establishment), only the expected turnover of the current calendar year is relevant. It is therefore only important whether the entrepreneur is expected to exceed the threshold of €17,500 based on the circumstances of the current calendar year. According to case law, in the year of establishment, only the expected (not the actual) total turnover can be considered as the appropriate basis for determining the turnover limits; because the decision on which tax form the entrepreneur is subject to must be made at the beginning of the entrepreneurial activity due to the consequences. It is a necessary decision that the entrepreneur must make in view of issuing invoices according to § 14 UStG. Please note that if the activity did not start at the beginning of the year, the expected total turnover of this year must be extrapolated according to § 19 (3) sentence 3 UStG to a total turnover forecasted for the whole year.
If you estimate a projected total turnover for the year of establishment of less than €17,500 at the beginning of the activity and wish to avail of the small business regulation, and if your tax office has approved the application of the small business regulation, the collection of VAT will be waived in the year of establishment even if the extrapolated total turnover actually exceeds the threshold of €17,500. However, VAT will be collected in the following year.
In general, it is neither advised nor discouraged to apply the small business regulation. It always depends on the specific situation. You have rightly noted that a small business owner according to § 19 UStG is not entitled to input tax deduction. Therefore, you should evaluate the relationship between turnover and operating expenses containing input tax. If you renounce the application of the small business regulation and the tax assessment becomes final, your waiver declaration will be binding for at least 5 years.
I hope I could be of assistance to you.
If there are still uncertainties, please feel free to use the follow-up function.
Best regards,
Dr. Yanqiong Bolik
Tax consultant
Bildstöckle 6, 70567 Stuttgart
Tel: +49 (0)711 / 2132 1815
Email: steuer@zdbz.de
www.steuerberatung.dr-bolik.de
