The small business regulation

Many people talk about them, but very few know what they are really about. Below we provide a brief overview of the small business regulation as it will apply until December 31, 2024, before it is “relaunched” from 2025.

When am I a small business within the meaning of § 19 UStG?

Whenever the turnover:

  • did not exceed EUR 22,000 in the previous year and
  • is not expected to exceed EUR 50,000 in the current year and
  • I am resident in Germany.

The sales tax is then calculated acc. § 19 para. 1 sentence 1 UStG is not levied. Value added tax within the meaning of § 13b para. 5 UStG – i.e. the so-called reverse charge procedure for intra-Community supply relationships – is not affected by this. Small entrepreneurs are therefore also liable for VAT for the corresponding services, provided they identify themselves as entrepreneurs by means of their VAT ID number.

The legal consequences of applying the small business regulation are as follows:

  • The tax exemption for intra-Community deliveries does not apply,
  • The option for tax liability according to § 9 UStG does not apply,
  • No separate tax statement pursuant to § 14 para. 4 UStG must be made,
  • It is not necessary to state the VAT ID number on the invoice and
  • Input tax may not be deducted.

For reasons of simplification, the “small business owner” is therefore treated as a non-entrepreneur. The decisive difference, however, is that he is still an entrepreneur within the meaning of § 2 UStG. The tax is simply not levied.

Exercise of the waiver of application

There is no special form of renunciation. A waiver is generally valid. for the entire calendar year or from the commencement of business activities during the year. In practice, this is done by submitting advance VAT returns or the annual return, in which the VAT is determined according to general rules. The mere (inadvertent) disclosure of VAT in invoices does not already constitute an option.

Advantages and disadvantages

The waiver of the tax exemption pursuant to § 19 para. 1 UStG is always advantageous if the supplies or other services of the small entrepreneur are provided to other entrepreneurs entitled to deduct input tax. The small business owner then “increases the price” of his service by the VAT without this placing an economic burden on his customer. In return, the waiving small business owner receives full input tax deduction entitlement for the services provided to him, provided that he fulfills the other requirements of § 15. Of course, this must be offset against the additional administrative work involved in submitting advance VAT returns.

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