Do I also have to pay sales tax if my company is making a loss?
January 15, 2022 | 40,00 EUR | answered by Quentin Reuter
Dear tax advisor,
I have been running a small event planning business for two years. Unfortunately, this year I have incurred a loss due to many events being cancelled because of the Corona pandemic, resulting in a significant decrease in my income. Now I am wondering if I still have to pay VAT despite the loss.
My business is exempt from VAT as a small business according to § 19 UStG. However, I am unsure if this exemption applies to years with losses. Is it possible that I still have to pay VAT despite the loss? Or is there a way to avoid VAT payments due to the loss?
I am concerned that VAT payments could further limit my already tight financial situation and potentially jeopardize the existence of my business. Is there a possibility to apply for a VAT exemption even in years with losses? Or are there other tax measures that could help me in this situation?
I would greatly appreciate your expert advice on this matter and hope that you can assist me. Thank you in advance for your support.
Yours sincerely,
Mia Wittik
Dear Ms. Wittik,
Thank you for your inquiry regarding turnover tax in loss years as a small business owner in the event planning sector. The situation in which your company finds itself due to the Corona pandemic is undoubtedly challenging and requires careful tax planning. I will now explain in detail how the turnover tax regulations in loss years for small business owners look.
According to § 19 UStG, small business owners are exempt from turnover tax if their annual turnover in the previous calendar year does not exceed 22,000 euros and is not expected to exceed 50,000 euros in the current calendar year. This regulation applies regardless of whether the company makes profits or losses. This means that even in loss years, you are exempt from turnover tax as a small business owner.
In your case, where you have recorded a loss, you do not have to pay turnover tax. The turnover tax liability does not depend on whether the company generates profits, but solely on the turnover thresholds for small business owners. Therefore, you can rest assured that turnover tax payments will not further restrict your financial leeway in loss years.
However, there is an important regulation to consider: As a small business owner, you are exempt from turnover tax, but you are not allowed to show turnover tax on your invoices. This means that you cannot claim input tax. So if you make purchases for which you have paid turnover tax, you cannot get it refunded. This limitation should be taken into account in your business planning.
Additionally, I would like to point out that there is no specific way to apply for an exemption from turnover tax in loss years. Turnover tax liability is solely based on the mentioned turnover thresholds for small business owners.
Overall, you can rest assured that as a small business owner, you are exempt from turnover tax even in loss years. If you have any further questions or need assistance with your tax planning, I am happy to help.
Best regards,
Quentin Reuter
