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What is VAT exemption?
The VAT exemption is regulated in § 19 Abs. 1 UStG. Accordingly, all small-scale entrepreneurs whose turnover last year was under 17.500 Euro and will not be higher than 50.000 Euro in the current year are exempted from VAT.
You do not have to do anything else: the exemption is automatic.
Turnover tax: waiver of the small business rules
If you sell to private persons or have municipal or state contracting entities which are exempted from VAT, the small business rules are favorable for you. In this case, you can offer your goods or services more cheaply because your customers do not have to pay VAT.
However, if you are mainly at Company A sales tax exemption does not make sense, because every commercial company will be happy to pay you VAT in addition to the fee.
However, you can keep the input tax on the sales tax that you pay to the tax office - and therefore have a higher profit overall.
In this case you should waive the exemption from VAT as per § 19 Abs. 2. For this purpose, you should make a cross on the questionnaire for tax registration or send an informal message to the tax office. However, the exemption from VAT is then binding for five years.
Sales over 17.500 Euro
If your turnover exceeds 17.500 Euro, you are taxable at the beginning of the following year. If you fall below the limit again, you can get rid of it again from next year - unless you have declared your waiver over the last five years, then this decision remains binding.
You can voluntarily give up VAT exemption even retroactively for all tax years for which there is no tax assessment. However, you have to repeat the sales taxes from your customers - and that can sometimes lead to problems.
Sales tax exemption for teachers
In addition to the small business regulation, according to § 4 Abs. 21 UStG, the teaching performance of self-employed teachers is exempt from VAT, if they prepare properly for a profession or a test to be submitted before a legal person under public law. For courses in public schools or colleges you are automatically exempt from VAT.
Private education institutions, on the other hand, should be certified by the competent state authority that their teaching fulfills the conditions of § 4 Abs. 21 UStG. In both cases, the exemption from tax is automatically applied to the teachers at the school.
On the other hand, non-profit institutions such as adult secondary schools are exempted from the VAT requirement pursuant to § 4 No. 22. Here, fee teachers are exempt from the value-added tax only if the Volkshochschule is still free for individual courses according to § 4 No. 21.
As a rule, the conditions for pre-vocational and preparatory courses consist of continuing vocational training courses, tuition and language tuition, as long as they prepare for examinations or the profession, school degrees and PC course. Pure hobby courses, language courses for holidays or computer courses for seniors can not be freed, since they have nothing to do with the profession.
Invoice and accounting
If you are exempt from VAT, you must not show VAT on your invoices. On the other hand, you must indicate on the invoice, why you are exempt from VAT: For example, because you make use of the small business regulation - in this case is on your account VAT exempt under § 19 para. 1 UStG. And you are not allowed to deduct input tax for your expenses.
The tax exemption and also the waiver of exemption always applies to all your business areas. So if you have registered two companies, for example because you are still working as a freelancer, you are either liable for VAT or exempt from VAT.
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