Why switching to standard taxation is important
If your total revenue exceeds €22,000 (Valid until the end of 2024), you will be subject to VAT from the following year. This means you’ll need to include VAT on your invoices and regularly submit VAT returns to the tax office.
Updates 2025: Switching to standard taxation:
As a small business owner, you're usually exempt from VAT – as long as your revenue stays below certain limits. But what if your business grows, or you decide to opt in voluntarily?
From 2025, new thresholds apply:
➡️ €25,000 in the previous year
➡️ €100,000 in the current year
Choosing standard taxation means charging VAT on your invoices and filing VAT returns – and once you switch, you're locked in for five years. We’ll walk you through what changes, what steps to take, and how to stay compliant with ease.
What do you need to do?
Apply for a VAT ID (if you haven’t already).
Charge and display VAT on your invoices: Depending on the customer’s location, you must calculate VAT.
Submit VAT returns: Be sure to authorize direct debit with the tax office or regularly check our emails.
Note: At smarta Steuerberatung, we notify the tax office about the switch and are happy to handle your VAT returns.
When do you need to display VAT on your invoices?
Starting January 1 of the new year, you must charge VAT for all services provided from that date onward.
Important: You do not need to charge VAT on revenue generated in the current year, even if the invoice is paid in the new year.
Invoice details – what must be included?
Invoice details are legally required elements that help identify the invoice, facilitate payment, and simplify accounting.
Mandatory invoice information includes:
Your full name and address and that of your customer
VAT ID or tax number of your business
Date of issue and consecutive invoice number
Quantity and type of goods/services provided
Date of supply/service
Net amount, applicable VAT rate (usually 19%), and the VAT amount
If it’s a credit note: indicate “Credit Note” and include your business’s tax number
Why are invoice details important?
Ensure clear invoice identification
Simplify bookkeeping and tax returns
Enable smooth payment processing
Are legally required and help avoid tax issues
Note: A complete and correct invoice is essential for your tax filing and getting paid on time. Make sure you comply with all legal requirements according to §14 of the German VAT Act (UStG).
How to calculate VAT (at 19%)
Formula:
Net amount × 1.19 = Gross amount
What are VAT returns (Umsatzsteuervoranmeldungen)?
Under standard taxation, you pay collected VAT to the tax office monthly or quarterly.
VAT returns include:
Total VAT collected from customers
Total input VAT paid to other businesses
You pay the difference to the tax office – or get a refund
Advantage: You are entitled to input tax deduction, meaning you can reclaim VAT on business-related expenses.
Note: We’ll take care of preparing and submitting your VAT returns. Payments must be made within 3 days unless you’ve issued a direct debit mandate. Refunds typically arrive within 1–3 weeks.
VAT rules by customer type
Customer type | Charge/display VAT? | Notes |
Business in Germany | ✅ Yes | From the new year |
Business in the EU | ⛔ No | Both VAT IDs on invoice + "Reverse Charge" note |
Business outside the EU | ⛔ No | Invoice note: “Service not taxable in Germany” (check with tax advisor) |
Private individual in Germany | ✅ Yes | From the new year |
Private in the EU | ✅ Yes | Taxation in Germany – possibly consult local regulations |
Private outside the EU | ✅ Yes | Taxation in Germany – possibly consult local regulations |
Services in the EU
VAT ID required: When dealing with businesses in other EU countries, you’ll need a VAT ID, which identifies your business within the EU. Apply via the Federal Central Tax Office.
Cross-border B2B services within the EU: No VAT charged – use the Reverse Charge mechanism. Both parties’ VAT IDs must appear on the invoice.
Missing VAT ID: Without it, you must charge German VAT.
Private EU customers: No VAT ID needed. You must charge German VAT.
Online sales: If your sales to other EU countries exceed €10,000, you must file a One-Stop-Shop (OSS) return. Register via the Federal Central Tax Office.
Services outside the EU
For services provided to businesses outside the EU (third countries), no VAT is charged. On the invoice, state: “Service not taxable in Germany.”
Important: For private customers outside the EU, tax treatment may vary by country – consulting a tax advisor is highly recommended.
Conclusion: Standard Taxation – Opportunities and Obligations
Switching to standard taxation brings administrative changes but also benefits like input tax deduction – meaning you can reclaim VAT on business-related expenses.
Depending on your customer’s location, you may need to report and pay taxes in their country. It’s best to discuss this with your tax advisor or your client directly
Do you need support?
For our clients:
Feel free to reach out to us anytime at kontakt-team@smarta-steuern.de or book a consultation here – we're here for you!
Not a smarta client yet? No problem!
Book an appointment here for our comprehensive startup package or a consultation if you only have questions about specific topics.
Further questions?
Contact us via the app or by email at kontakt-team@smarta-steuern.de if you want to learn more about our consulting services or have other tax-related concerns.