In addition to many regulations, so-called simplification regulations can be found in German sales tax law, which offer companies various options. This also includes the small business regulation , which offers the entrepreneur the option of deciding on his own sales tax liability. If you only generate low sales, you can be exempt from sales tax. At the same time, of course, this also means that things have to be made much easier when it comes to bookkeeping.
What does small business regulation mean?
Anyone who is classified as a small business owner by the tax office in accordance with Section 19 UstG does not need to show sales tax or value added tax on their invoices. This makes bookkeeping much easier and can offer certain advantages if you mainly serve private individuals. On the other hand, however, the tax office does not reimburse input tax . In this context, input tax refers to the sales tax that you pay when you make purchases for the company.
Example pay input tax
According to WHICHEVERHEALTH, if a small business owner buys office supplies for 100 euros, he has to pay 19% VAT and comes to an amount of 119 euros to be paid. In the case of input tax, those liable for sales tax can claim this 19 euros in their tax return and get it back. Small business owners cannot benefit from this.
In general, the small business regulation is intended to make business life easier for business people with low incomes. Incidentally, those who apply for small business status at the tax office do not need to be ashamed, because the simplified procedure also makes work easier for the tax office. In this way, they are often spared the high administrative and auditing effort of taxpayers with low sales.
Relief for small business owners
Anyone who is subject to regular sales tax taxation must expect additional expenses and deal with legal provisions. For example, they have to find out the right VAT rate for their deliveries or services and apply it correctly. This is not always a flat rate of 19%, but can also be 7% or even 0%. The customer must then be shown this sales tax rate including the sales tax amount on the invoice and invoiced. This applies in particular to business customers, but also to private customers who cannot pay the additional amount.
The invoice regulations of the sales tax law must be strictly observed. In the future, business people will have to keep all incoming invoices, receipts from purchases or receipts and the VAT. calculate out. This is the only way to claim input tax. In addition, there is the expense of the electronic advance VAT return, which is incurred in addition to the annual tax return, monthly or quarterly. The person liable for sales tax must then deduct the payment from this himself and transfer it to the responsible tax office without being asked. Not to be forgotten is the annual sales tax return,which always arises at the beginning of the following year. There may then also be various final payments for the respective financial year, which of course also have to be paid to the tax office. In general, it can be said that small businesses are enormously relieved and do not need to worry about all these aspects.
When does the small business regulation make sense?
If an entrepreneur meets the requirements for a position as a small business owner, this does not necessarily mean that he has to forego the application. However, if he decides to show sales tax in the future, he is bound by this decision for five years. But why voluntarily undertake this additional effort? Quite simply: Entrepreneurs who are planning large-scale business acquisitions can benefit from waiving the small business regulation.
Requirements for the small business regulation
Self-employed in the form of a sole proprietorship or freelancer can be run as a small business owner. Likewise companies such as a limited liability company ( GmbH ), a company under civil law ( GbR ), a company company (limited liability) ( UG ), or a stock corporation ( AG ). So it doesn’t depend on the size of the company or the number of employees, but on the turnover. However, what is important is the turnover that is achieved in two consecutive years. There are therefore two defined limits in the law, which must be adhered to.
The turnover in the previous calendar year must not be higher than 22,000 euros. In the current calendar year, it may not exceed the 50,000 euro limit.
Writing invoices as a small business owner
An invoice without sales tax must be marked accordingly. Of course, this provides the customer with conclusions about sales, which can be a disadvantage. However, this must be noted on the invoice, although a single sentence is sufficient to indicate this. First of all, it is important that the relevant paragraphs § 19 UstG. is pointed out.
“Small business regulation according to § 19 UstG: No sales tax reported.”
It makes sense to place this note next to the tax number. In this way, the invoice recipient can directly understand why no sales tax ID has been specified. Otherwise, even small business owners have to orientate themselves on the most important components of an invoice.
Mandatory information for small business invoices
- Name and address of the entrepreneur
- Address of the invoice recipient
- Invoice date / date of issue
- bill number
- Delivery or service date
- Description of performance and quantity
- Invoice amount
- tax number
- Reference to small business regulation