How does the small business regulation affect value added tax?
June 17, 2022 | 30,00 EUR | answered by Günther Hering
Dear tax advisor,
I am Robert Bergner and have been running a small online business for some time, selling handmade furniture. So far, I have been paying the sales tax as usual, but since my turnover is below the threshold of 22,000 euros per year, I have been advised to opt for the small business regulation.
However, I am unsure about how this regulation affects the value-added tax. Up to now, I have been listing my prices including sales tax and paying it accordingly. Do I now no longer have to calculate and pay the sales tax? Or are there specific regulations that I need to consider?
I am concerned that I might do something wrong and end up having problems with the tax office. Are there specific requirements that I need to meet in order to take advantage of the small business regulation? And what are the implications for me as a business owner?
It would be very helpful if you could answer these questions for me and provide possible solutions so that I do not have any problems with the value-added tax in the future.
Thank you in advance for your support.
Sincerely,
Robert Bergner
Dear Mr. Bergner,
Thank you for your inquiry regarding the small business regulation and its effects on value added tax in your online business. I am happy to help clarify these questions for you and offer a solution to avoid potential issues with the tax office.
The small business regulation according to § 19 UStG allows entrepreneurs who fall below the revenue threshold of 22,000 euros per year to be exempt from VAT. This means that as a small business owner, you are not allowed to show VAT on your invoices and also do not have to submit VAT returns.
If you choose to apply the small business regulation, it is important to note that you also cannot claim input tax. This means that you are not entitled to a refund of VAT for your purchases and operating expenses. This can lead to financial disadvantages, especially in the initial phase of a business, as you cannot deduct input tax as an operating expense.
In order to benefit from the small business regulation, you must explicitly inform your customers that you are applying this regulation and not showing VAT. This should be clearly stated on your invoices to avoid misunderstandings.
It is important to keep an eye on the revenue threshold of 22,000 euros per year and react promptly if you exceed it. In this case, you will have to start showing VAT again from the following year and submit corresponding VAT returns.
I recommend that you consult with your tax advisor or a VAT specialist to discuss your individual situation and minimize any risks. With the right advice, you can ensure that you apply the small business regulation correctly and avoid any issues with the tax office.
I hope that my explanations are helpful to you and I am available for any further questions.
Best regards,
Günther Hering
