How can I, as a small business owner, avoid paying sales tax?
March 8, 2023 | 50,00 EUR | answered by Lina Sauer
Dear tax consultant,
My name is Erwin Otten and I run a small online trading company. Over the past few years, I have been steadily generating revenue, but I have not yet dealt with the issue of sales tax. Now I am faced with the question of how I, as a small business owner, can avoid sales tax.
So far, I have never invoiced sales tax and therefore have not remitted it either. However, I am wondering if it would be advisable to change this in order to claim input tax. I am concerned that switching to regular taxation could lead to higher costs and increased administrative burden.
I would like to know what options are available to me as a small business owner to avoid sales tax and what advantages and disadvantages could arise. Are there alternative ways to benefit from tax advantages without having to invoice sales tax? How can I ensure that I handle taxes correctly and avoid making mistakes?
I look forward to your support and thank you in advance for your help.
Sincerely,
Erwin Otten
Dear Mr. Otten,
Thank you for your inquiry regarding value added tax as a small business owner in your online trading company. It is important to familiarize yourself with this topic in order to take advantage of tax benefits and avoid mistakes.
As a small business owner according to § 19 UStG, you have the possibility to be exempt from value added tax as long as your turnover in the previous year does not exceed 22,000 euros and is not expected to exceed 50,000 euros in the current year. In this case, you are exempt from the obligation to charge or remit value added tax. This can be a relief especially for smaller businesses, as it eliminates the administrative burden and costs associated with value added tax.
However, as a small business owner, you also have the option to voluntarily opt for standard taxation. This means that you can charge and remit value added tax, but at the same time claim input tax. This allows you to deduct the value added tax you pay to suppliers from the value added tax you receive from your customers. This can be particularly useful if you have many expenses for which you can claim input tax, and you want to reduce the value added tax burden.
However, switching to standard taxation also has some disadvantages. In addition to the additional administrative burden, you must submit regular value added tax returns and remit the value added tax to the tax office. You must also ensure that you calculate and show the value added tax correctly to avoid tax errors.
There are also alternative ways to benefit from tax advantages without having to charge value added tax. For example, you can make agreements with your suppliers to claim input tax in different ways or use alternative financing models to reduce the tax burden.
To ensure that you are acting correctly in terms of taxation and avoiding mistakes, I recommend seeking advice from a tax advisor. A tax advisor can provide you with individual advice tailored to your business and situation, and help you maximize tax benefits.
I hope this information has been helpful to you. If you have any further questions or require individual consultation, I am at your disposal.
Sincerely,
Lina Sauer
