Small business owner?
May 2, 2011 | 50,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I am receiving a regular pension and would like to enter into a contract with the University Medical Center in Hamburg according to the enclosed offer. The resulting income does not exceed the limit of 17,500 euros in any year.
1) Am I liable for value-added tax?
2) Do I need to become a small business owner, or can a work contract also be carried out as a freelance activity WITHOUT VAT?
3) Is a "work contract" the most suitable option here, or should other forms of contracts be considered?
Thank you very much!
Dear consultant,
Thank you for your inquiry, which I would like to answer based on the information you provided and in the context of your commitment within the scope of an initial consultation as follows:
First of all, based on your information, the status of a small business owner is given. This is subject to two conditions, BOTH of which must be met:
1. The total turnover in the previous calendar year must not have exceeded 17,500 EUR AND
2. The total turnover is not expected to exceed 50,000 EUR in the current calendar year.
The legal provision can be found in § 19 para. 1 UStG.
You are a small business owner within the meaning of the aforementioned provision, as both thresholds are not exceeded with annual turnover of 10,000 EUR.
However, you need to be careful in the year of starting your business. At the beginning of your business, there is no turnover from the previous year, so only the 17,500 euro threshold is relevant. The expected turnover in the year of establishment must therefore be extrapolated to the expected annual turnover (§ 19 para. 3 UStG). For example, if you start your business on July 1, 2011 and expect a turnover of 10,000 euros, you must calculate as follows: 10,000 divided by 6 times 12 = 20,000. In this case, you would not qualify as a small business owner for the years 2011 and 2012 and would have to pay sales tax.
For this extrapolation in the first year, the crucial factor is the start of your preparations for the business. For example, if you already started negotiations with the university in April 2011 and expect a turnover of 10,000 euros in 2011, you must calculate as follows: 10,000 divided by 8 times 12 = 15,000. The extrapolated turnover would then be 15,000 euros and would be below 17,500 euros, so the small business owner rule would apply.
Turnovers that are tax-free according to § § 4 No. 8i, No. 9b and No. 11-28 UStG would not be included in the total turnover. If, upon separate examination, such tax-free turnovers exist, you would not have to pay sales tax even if you exceed the thresholds of a small business owner according to § 19 UStG, which answers your second question. Based solely on the attachment, I cannot assess any potential tax exemption.
In freelance activities, it is difficult to decide whether a work or service contract should be concluded. In both types of contracts, the subject of the contract is the provision of work in exchange for payment. If you only provide advice (a work service), then a service contract must be concluded. However, if achieving a work result is required, then a work contract must be concluded. In this case, you should also seek advice from a lawyer, as a tax advisor is not allowed to provide legal advice.
I hope I was able to assist you.
Sincerely,
Tax Advisor / Diplom Business Economist
