Can I as a small business owner voluntarily waive the obligation to pay sales tax?
November 14, 2023 | 40,00 EUR | answered by Lina Sauer
Dear tax advisor,
my name is Rolf Seiler and I have been running a small business as a small entrepreneur for several years. So far, I have benefited from the small business regulation and therefore did not have to show any sales tax on my services. However, I am now considering whether it could be sensible for me to voluntarily waive the obligation to pay sales tax.
My business has been steadily growing in recent years and I now have the opportunity to handle larger orders and thus increase my revenue. However, the obligation to pay sales tax also entails additional bureaucratic efforts and therefore I wonder whether it would not be easier and more efficient to waive the small business regulation.
My concern is that by waiving the obligation to pay sales tax, I may incur higher costs and thus reduce my profit. On the other hand, it could also be that by being able to deduct input tax, I ultimately achieve more profit.
Therefore, I would like to know from you whether it could be sensible for me as a small entrepreneur to voluntarily waive the obligation to pay sales tax. What would be the advantages and disadvantages of waiving the obligation for my business and what would be the impact on my financial situation? Are there specific criteria that I should consider in my decision?
Thank you in advance for your support and expertise.
Best regards,
Rolf Seiler
Dear Mr. Seiler,
Thank you for your inquiry and your interest in the VAT liability as a small business owner. It is good that you are thinking about your tax situation and considering possible options.
First of all, I would like to explain that the small business regulation according to § 19 UStG applies to companies with an annual turnover of no more than 22,000 euros. As a small business owner, you are exempt from VAT and therefore do not have to show VAT on your invoices. This usually simplifies the accounting and saves you time and effort.
However, if your business has grown in recent years and you are handling larger orders, it may be useful to voluntarily waive the small business regulation and become liable for VAT. With VAT liability, you have the opportunity to claim input tax invoiced to you by your suppliers. This can have a positive impact on your financial situation and ultimately lead to higher profits.
However, you should also consider that VAT liability involves additional bureaucratic efforts. You must submit regular VAT returns and pay the VAT to the tax office. This requires a certain amount of organizational and administrative work that you should take into account.
Therefore, it is important that you conduct a detailed cost-benefit analysis to decide whether waiving the small business regulation is worthwhile for you. Consider your current revenues, expenses, and planned investments. You should also discuss the tax implications of waiving VAT liability with your tax advisor to minimize potential risks.
In conclusion, there are pros and cons that you should consider before making a decision. I recommend that you delve into the topic intensively and, if necessary, seek professional advice to find the best solution for your business.
I hope that this information has been helpful to you. Please feel free to contact me if you have any further questions.
Sincerely,
Lina Sauer
Tax Advisor
