How does the small business regulation work with regard to value added tax?
January 27, 2024 | 50,00 EUR | answered by Lina Sauer
Dear tax advisor,
I am Ben Dietrich and have been running a small online business for a year, selling handmade products. So far, I have always applied the regular taxation as my turnover was below the threshold of 22,000 euros. However, I have now learned that I could also benefit from the small business regulation for sales tax.
I am unsure, however, how exactly this regulation works and whether it is beneficial for my business. I would like to know what the advantages and disadvantages are if I decide to opt for the small business regulation. I am also interested in how to best transition from regular taxation to the small business regulation.
My concern is that I might make mistakes during the transition and end up with disadvantages for my business. Therefore, I would be very grateful if you could explain to me exactly how the small business regulation works and whether it is advisable for me as an online entrepreneur in my case. Are there specific requirements that I need to meet in order to benefit from this regulation?
I look forward to your assistance and thank you in advance for your help.
Best regards,
Ben Dietrich
Dear Mr. Dietrich,
Thank you for your inquiry regarding the small business regulation for value added tax. As a tax consultant specializing in VAT, I am happy to assist you with your questions.
The small business regulation according to § 19 UStG allows entrepreneurs to be exempt from VAT if they meet certain requirements. This includes, among other things, that the turnover in the previous calendar year did not exceed 22,000 euros and is not expected to exceed 50,000 euros in the current calendar year. Since your turnover has been below the threshold of 22,000 euros so far, you generally qualify for the small business regulation.
The advantages of the small business regulation are mainly that you do not have to charge VAT and can therefore become more attractive to your customers. In addition, there is no need to submit VAT returns. This can simplify your accounting and save time. However, you are also not allowed to claim input tax from purchase invoices, which can be a disadvantage for some entrepreneurs.
If you decide to switch from regular taxation to the small business regulation, you should first check if you meet the requirements and then submit a corresponding declaration to the tax office. It is important that you do this in a timely manner so that the new regulations apply from the desired date.
It is understandable that you are concerned about making mistakes during the transition. Therefore, I recommend that you inform yourself thoroughly beforehand and, if necessary, seek professional assistance. I am happy to assist you with any further questions and support you in making the decision for or against the small business regulation.
I hope that this information has been helpful to you and I am available for any further questions.
Best regards,
Lina Sauer
