Income of a Limited through a cosmetics salon
August 10, 2009 | 20,00 EUR | answered by Irmingard Huber-Stempfel
A Ltd. has generated revenue through a collaboration with a beauty salon using a device for permanent hair removal, which is not subject to VAT. Should the income from this still be subject to VAT, or can VAT be waived on revenue and expenses?
Dear inquirer,
I cannot fully answer your question. Important factual elements are missing. What kind of cooperation exists with the beauty salon? Why is the beauty salon exempt from VAT? (Small business owner?) I assume that the Limited company rents the device to the beauty salon? As you can see from my questions, a concrete answer is not possible. This can be provided when responding to my questions within the scope of the inquiry function.
In principle, a Limited company is an independent entrepreneur in terms of VAT law. It is questionable whether a further entrepreneurial status has arisen through the cooperation, for example, through a partnership. This would then be another entrepreneur. The beauty salon would then be the third entrepreneur. Every entrepreneur must subject their income to VAT. The small business owner regulation applies to every entrepreneur (revenue up to €17,500). Every entrepreneur assesses the tax exemption of their turnover according to § 4 UStG. The same applies to the tax rate. When applying the small business owner regulation, VAT is not levied and there is no input tax deduction from the purchase invoices.
An exception to this principle only exists in the case of group taxation (§ 1 Abs. 2 Nr. 2 UStG). This requires an economic, financial, and organizational integration into the controlling entity. The internal transactions between the subsidiary and the controlling entity are then not relevant for VAT purposes.
I look forward to your detailed description of the facts.
My consultation is provided within the scope of the initial consultation. Changes in the factual circumstances may alter the legal content of the response.
Yours sincerely,
I. Huber-Stempfel
