If you exceed the limit of 22.000€ with your total revenue, you are no longer subject to the small business regulation in the next year.
As a result, there are a few things to keep in mind, because you will be subject to VAT tax as of next year. And therefore you are also obliged to submit advance VAT returns.
What does standard taxation mean for you?
Depending on the location of your customer or business partner, you must charge VAT tax and show it on your invoices.
Apply for a VAT identification number if you do not already have one.
Either you give your tax office a direct debit mandate or check your emails from us carefully for advance VAT notifications.
Good to know:
The tax office will be informed us about the change to standard taxation.
As a tax service customer, we take care of your advance sales tax returns.
What does total revenue mean?
When do I have to show VAT tax on my invoices?
If you are liable for VAT in the new year, you do not yet have to calculate VAT for your sales this year. Even if the invoices are not paid until the new year. VAT is only to be stated for all services you provide from 01.01. of the new year.
What information should be included in your invoice?
The information that must be included in your invoices is regulated in §14 UStG:
Full name and address of you and your customers,
the tax number or VAT identification number (VAT ID) of the company providing the service,
the date of issue,
consecutive number with one or more series of numbers, which is assigned once by the invoice issuer to identify the invoice (invoice number),
the quantity and type (customary commercial description) of the goods supplied or the scope and nature of the service provided
the date of delivery or service
the net invoice amount
the applicable VAT rate (usually 19%) and the amount of tax or, in the case of a tax exemption, an indication that the supply or service is subject to a tax exemption, and
in the case of credit invoices, the indication "credit note".
How do I calculate sales tax?
The formula for calculating VAT tax at the standard 19% rate is:
Net amount x 1.19 = Gross amount.
What are advanced VAT tax returns?
In the case of standard taxation, the additional VAT tax earned is paid to the tax office. This is done monthly or quarterly in advance of VAT returns. These are listed:
the total amount of VAT tax you have earned and
the sum of the VAT tax paid by you to other companies (input tax).
With a positive outcome, you owe the tax office this amount. With a negative outcome, you will receive a refund.
The good thing is that if you are subject to standard taxation, you are also entitled to deduct input tax! This means that you can reclaim the VAT tax you have paid for business-related expenses. This also happens in the context of the advance return for VAT tax.
Note: We will prepare the advance VAT return for you. On the due date, we transmit your advance return to the tax office and send you an e-mail with the tax refund or payment.
You have to transfer the payment to the tax office within 3 days. Unless you give a direct debit mandate. You will usually receive a refund in 1 to 3 weeks.
VAT tax regulations depend on the customer type
Customer type | Charge / show VAT | Further info |
Your customer is an entrepreneur in Germany | ✅ |
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Your customer is an entrepreneur in an EU foreign country | ⛔ |
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Your customer is an entrepreneur from a third country | ⛔ |
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Your customer is a private person in Germany | ✅ |
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Your customer is a private person in an EU foreign country | ✅ |
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Your customer is a private person from a third country | ✅ |
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Do you provide services in other EU countries?
If you do business with companies outside Germany, you need a VAT ID number. This identifies your company within the EU. If you did not already apply for it when you set up your business, you can do so now at the German Federal Central Tax Office (Bundeszentralamt für Steuern).
Tip: Since it takes a long time to obtain a VAT ID, you should apply for one as soon as possible. We can take care of this process for you for 99 euros.
The sale of services within the EU is called an intra-community other services. If you and your customer have a VAT ID, no VAT has to be charged to the service. Instead, both VAT IDs must be indicated on the invoice.
In this case, the buyer is obliged to pay tax on the services received in his own country. This process is called the reverse charge procedure and must be marked on the invoice. For example, "Note: The VAT liability is transferred to the recipient of the service (reverse charge system)." or simply "Reverse charge service".
What happens if the VAT ID is missing from the invoice?
If the VAT ID is missing, you will have to pay German VAT in the worst case.
What if my customers are private individuals?
In this case, the VAT ID is not mandatory. You, as the seller, have to pay German VAT on the service at the corresponding VAT rate for Germany.
Do you trade online?
If you sell more than 10,000 euros to other EU countries, you must submit an OSS declaration and add foreign VAT to your services.
To do this, you register with the national contact point, the Federal Central Tax Office.
Do you provide services outside the EU?
If you provide services to an entrepreneur in a third country - i.e. all countries that are not members of the EU - there is usually no need to indicate the VAT tax.
Therefore, you do not show VAT tax on your invoice. Instead, you indicate the note "Service not taxable in Germany".
You may then have to pay tax on the service in your customer's country of residence. Whether this is the case is best clarified with a local tax advisor or discussed with your customer first.
If your customer in the third country is a private individual, it is particularly important to consult a local tax advisor. Private customers cannot tell you whether you have to pay VAT tax in their country.