Small-business rule: found and work without VAT

With the small-business rule you do not have to show and pay VAT, which simplifies invoices and bookkeeping. It applies as long as your turnover does not exceed certain limits. But you also cannot then claim input tax. Whether it is worthwhile depends on your activity.

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Your chances of getting your money back

As a small business you do not pay VAT and do not show it on invoices if your previous-year turnover and the expected turnover in the current year do not exceed the statutory limits (§ 19 UStG).

This simplifies the bookkeeping and makes offers cheaper for private customers. Disadvantage: you cannot claim input tax from your incoming invoices. With high initial investments, waiving the rule can be more sensible.

What you should do now

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1. Check the turnover limits
If your turnover is below the statutory limits, the small-business rule is an option.
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2. Weigh advantages and disadvantages
No VAT, but also no input-tax deduction. With many investments, waiving it can be cheaper.
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3. Choose in the questionnaire
At the tax office (tax registration form) you decide for or against the rule.
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4. Keep the limits in mind
If you exceed the turnover limit, you become liable for VAT in the following year, plan for that.

How to spot the scam

You show VAT despite small-business status (then you owe it).
You waive the rule although you have hardly any input tax.
You exceed the turnover limit unnoticed.

Frequently asked questions

What is the point of the small-business rule?

You do not have to show and pay VAT (§ 19 UStG) as long as your turnover does not exceed the statutory limits. This simplifies invoices and bookkeeping and makes your prices more attractive for private customers.

What is the disadvantage?

You cannot claim input tax from your incoming invoices. If you have high investments or many business customers who can deduct the VAT anyway, voluntarily waiving the rule can be cheaper.

What happens if I exceed the turnover limit?

Then the small-business rule ceases and you become liable for VAT normally, as a rule from the following year. Keep an eye on your turnover and adjust your invoicing and bookkeeping in good time.

Take action now

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General information for self-help, not legal advice (RDG). In case of a high loss or uncertainty: contact a consumer advice center or a lawyer.