The small business regulation (§ 19 UStG) is a legal simplification regulation for companies with only low turnover. In this case, the levying of turnover tax is waived. You can make use of the small business regulation if your total turnover (§ 19 para. 3 UStG) did not exceed € 22,000 in the previous calendar year and is not expected to exceed € 50,000 in the current calendar year.
If you start your business activity for the first time in the course of the calendar year, the turnover limit of € 22,000 applies for the application of the small business regulation. In this case, you must estimate the expected turnover for the start-up year as part of a forecast. In order to check whether the limit of € 22,000 is likely to be complied with in the year of foundation and thus whether the small business regulation can be applied, the estimated sum of the sales must be extrapolated to the full calendar year.
The entrepreneurial activity is commenced on 10 May. For the period from 10 May to 31 December, you calculate gross receipts (i.e. including VAT) of € 12,000.
When checking whether the small business regulation can be claimed, you must extrapolate the estimated turnover of € 12,000 for the months May to December to a total annual turnover. In the present case, this amounts to € 18,000 and is calculated as follows: 12.€ 000 / 8 months (May to December) x 12 months. Since the limit of 22,000 € is not exceeded in the opening year, you can apply the small business regulation.
Example as above. However, you calculate a total turnover of € 20,000 in the year of foundation. Since the total turnover extrapolated to the calendar year amounts to € 30,000 (€ 20,000 / 8 months (May to December) x 12 months) and exceeds the relevant amount limit of € 22,000, the requirements for the application of the small business regulation are not met.
The small business regulation means that no sales tax is levied on the sales you carry out. However, due to the fact that sales tax is not levied, you cannot claim an input tax deduction for services received. The denial of the input tax deduction can have an unfavorable effect on the small business regulation under certain circumstances. The law therefore gives you the option of waiving the small business regulation and opting for taxation in accordance with the general regulations (so-called option to standard taxation, Section 19 (2) UStG). If you waive the application of the small business regulation, you must pay tax on your sales regardless of their amount, but you receive the input tax deduction under the further conditions of § 15 UStG. You are bound to the waiver for 5 years.
If you apply the small business regulation, you may not show VAT separately in your invoices. In the case of small-value invoices (invoices whose total amount does not exceed € 250; § 33 UStDV), the indication of the tax rate is deemed to be a separate tax statement.
If you do not observe this and show the tax separately in invoices or state the tax rate in small-value invoices, this will lead to the consequences of § 14c para. 2 UStG (unauthorised tax display) and you will owe the VAT. Your invoice recipients cannot deduct the unauthorized tax amounts as input tax.