When can I claim the small business regulation?
March 13, 2024 | 40,00 EUR | answered by Friedhelm Sauer
Dear tax consultant,
My name is Uwe Böhm and I have been running my own online business as a supplier of artisanal supplies for a year now. So far, I have not taken care of value added tax, as I fall below the turnover limit for the small business regulation. However, I am unsure whether I am actually allowed to take advantage of this regulation.
Currently, my annual turnover is 20,000 euros and I expect it to steadily increase in the coming years. I want to ensure that I can take advantage of all tax benefits without breaking any laws. My concern is that I may be misinformed and end up having to pay high fines.
Could you please explain to me under what conditions I am allowed to take advantage of the small business regulation? Are there specific criteria that I must meet? What would be the consequences if I were to mistakenly claim the regulation?
I would greatly appreciate it if you could help me with this question. Thank you in advance.
Best regards,
Uwe Böhm
Dear Mr. Böhm,
Thank you for your question regarding the small business regulation and value-added tax. It is understandable that as a business owner, you want to inform yourself about your tax obligations and options in order to avoid potential risks.
The small business regulation according to § 19 UStG allows companies with an annual turnover of less than 22,000 euros (starting from the year 2020) to be exempt from VAT. This means that you do not have to show VAT on your invoices and also do not have to submit VAT returns. So, you can take advantage of the small business regulation as long as your annual turnover is below this threshold.
However, there are some criteria to consider in order to correctly apply the small business regulation. Firstly, you must inform your customers that you are using the regulation and not showing VAT. This is usually done by stating "VAT exempt according to § 19 UStG".
Furthermore, you must bear in mind that you can only take advantage of the regulation if you do not want to claim input tax. This means that you cannot offset VAT on purchases or investments. If you mistakenly claim input tax while using the small business regulation, it can lead to tax consequences. You would then have to repay the input tax wrongly deducted and potentially also pay fines.
Therefore, it is important to monitor your turnover development and check in time whether you exceed the 22,000 euro threshold. In this case, you would need to register and pay VAT.
I hope this information helps you and answers your question. If you have any further questions or need assistance, I am happy to help.
Best regards,
Friedhelm Sauer
