The term small business regulation is a synonym for a relief provision in the sales tax law for small companies, self-employed and freelancers who can be exempted from certain sales tax obligations due to only low sales. 

The Turnovers

The relevant turnover, which must be taken into account when checking the above-mentioned limits, is the sum of the fees received in the calendar year (i.e. actually paid by the customers) less the turnover from the sale of fixed assets. When starting an entrepreneurial activity, the expected turnover in the calendar year must be estimated. If this is unlikely to exceed the turnover limit of € 17,500.00, the entrepreneur is generally considered to be a small entrepreneur. As you calculate sales tax  you can find the solutions easier than ever.

  • If the small business regulation applies, the entrepreneur may not levy any sales tax on his sales. The entrepreneur can, however, voluntarily waive the small business regulation (option for sales tax). In this case there is also the option of claiming the input tax paid to the tax office, which other entrepreneurs have invoiced for operating expenses.
  • If the turnover limits are exceeded, the entrepreneur must levy turnover tax on his turnover. If a small business owner opts for sales tax, he must explain this to the tax office. His decision binds him for five years. Legal basis: Section 19 (1) and (2) of the Value Added Tax Act (UStG) how do you opt for the small business regulation at the beginning of self-employment?

The small business regulation is an option. Immediately after registering a business with the responsible municipality or registering a self-employed (freelance) activity with the tax office, you will receive a questionnaire from them. This questionnaire asks how one would like to proceed with regard to sales tax. If no information is provided, the tax office generally assumes that the small business regulation will be applied. 

What if a small business owner accidentally bills sales tax?

An inadvertent identification of sales tax by a small business owner is of course associated with an obligation. Unauthorized sales tax must be paid to the tax office in any case and this regardless of whether the recipient of the invoice has paid it or not. The incorrect invoice can be corrected immediately after the incorrect invoice has been issued to avoid paying the tax office. 

Legal basis: § 14c Paragraph 2 UStG What effects does the small business regulation have on the invoices to be issued?

It is particularly important that small businesses do not need to show sales tax on invoices issued. The following minimum components of an invoice, which are required for entrepreneurs subject to VAT, are also relevant for invoices from small businesses: