Company founders and new entrepreneurs can make use of some regulations that make things easier for them. The small business clause is one of them. Entrepreneurs who make use of this do not have to show sales tax on their invoices. And that can make your bookkeeping much easier.
Definition of the small business clause
The small business clause is an important part of the small business regulation according to § 19 UStG , which names the basic guidelines for small businesses and thus defines from when a company can still be regarded as a small business.
What is meant by the small business clause?
According to sportingology, the small business regulation can be used as a small business owner . The use is free and each person can decide for himself whether he or she would like to implement it for their own company. The small business clause determines the prerequisites for being recognized as a small business owner. This clause therefore states that the company had a turnover of less than 22,000 euros in the previous year and will not exceed 50,000 euros in the current year . If this happens, the company may no longer be seen as a small business and therefore be subject to sales tax.
Example:
In the case of a small business that can post an annual turnover of around 10,000 euros , the small business clause comes into force, since the turnover of the previous year does not exceed 22,000 euros and the turnover in the current year remains below 50,000 euros .
This can look like this:
| Year | Sales in the previous year | Estimated sales in the current year | Small business owner (yes / no) |
| 2019 | 10,000 euros | 10,000 euros | Yes |
| 2020 | 10,000 euros | 30,000 euros | Yes |
| 2021 | 30,000 euros | 60,000 euros | No |
| 2022 | 60,000 euros | 90,000 euros | No |
Proper invoicing as a small business owner
It is particularly important to keep an eye on sales, because a small business owner who falls under the small business regulation does not have to calculate sales tax on the invoice. However, if the small business owner decides to refrain from the small business regulation, then the customer has to pay 19% sales tax to the company.
Billing information
If the small business owner makes use of the small business regulation and is thus exempt from sales tax, this must be noted on the invoice. This can be done, for example, with the following sentence under the invoice: “There is no disclosure of sales tax due to the application of the small business regulation according to § 19 UStG .”
Small business regulation according to § 19 UStG
In the case of a small business with low income, there is the possibility of making use of the small business regulation according to § 19 UStG . The customer does not have to be charged 19% and no sales tax has to be paid to the tax office. This is not only a financial advantage, but at the same time the bookkeeping is greatly simplified.
How is the small business regulation applied for?
The application for the use of the small business regulation can be noted in the application for tax registration. This confirms that the income in the previous year or, in the case of a start-up, in the current year does not exceed the EUR 22,000 limit.
This form is sent by the tax office after the establishment of a company or trade. Freelancers have to apply for this at the tax office. If the small business regulation according to § 19 UStG is to be waived, then this is simply not noted in the sheet. However, this waiver means that the small business regulation cannot be used for the next five years.
Apply the VAT exemption correctly
Although there are many positive aspects associated with the VAT exemption through the small business regulation , it does not directly mean that this is the right decision for every company. If, for example, a large purchase is planned, such as the acquisition of a company car, then it can be more worthwhile to forego the VAT exemption and thus to recoup the VAT paid from the tax office.
Furthermore, there are many small business owners who deliberately keep their sales low in order not to exceed the sales amount so that their own company cannot grow. When implementing the VAT exemption, a few things must be observed, for example the entrepreneur must specifically note the VAT exemption in the invoice so that it is legally recognized.
Small business owner invoice template
As a small business owner, one must above all pay attention to the invoice, which is subject to special guidelines depending on whether the small business regulation is used or not. Fortunately, you can use one of our many templates for this and then adapt it to your own wishes and your own company.
Mistakes Every Small Business Owner Should Avoid
Mistakes happen quickly, especially when you are just taking the first steps with your own company. There are above all these six mistakes that can be avoided with optimal preparation and the necessary knowledge.
Apply the small business regulation even though it is not worth it
It sounds like the small business regulation only offers advantages for small business owners. The waiver of sales tax, no payment of sales tax to the tax office and simplified accounting. However, this does not apply to every company, because especially if there are one-time or regular high costs within the company for which a sales tax is charged by another company, the repayment of the sales tax can ultimately be more profitable than the waiver. There must be a sales tax estimate can be paid to the tax office, but this sum can be recovered from its own customers and finally the small business owner who pays the sales tax to other companies himself also gets this back from the tax office. In this case, it can be worthwhile to take on the hassle of bookkeeping and accounting.
Miscalculate when it comes to sales
It is particularly annoying when sales are incorrectly assessed or possibly completely lost sight of. In the worst case, it can happen that the small business no longer falls under the small business regulation for the current year and the customer was not charged any sales tax for the whole year. Now there are two options , on the one hand it can happen that 19% of the turnover is paid out of pocket or that every invoice has to be rewritten and the customer pays it retrospectively. Either way, this involves a lot of work and high costs.
Do not take advantage of the small business regulation at first and then claim it in the following year
Unfortunately, it does not work for the small business owner to waive the small business regulation one year and use it in the coming year, because the small business regulation falls under the five-year regulation , so that the waiver means that the entitlement is waived for five years and therefore not is actively usable .
Forget the note on the VAT exemption on the invoice
It is important to understand what a small business owner’s bill should look like. If, for example, sales tax is waived, this must also be noted on the invoice so that this is also recognized by the tax office. A simple sentence under the invoice that indicates this exemption is sufficient.
Show VAT on the invoice
If the small business regulation is used and the 19% sales tax is still paid to the customer, then this is simply wrong. The regulation is characterized by the fact that no sales tax has to be charged to the customer and therefore no tax is paid to the tax office.
Apply the small business rule for multiple companies
With the small business regulation, the income or the turnover must fall under certain guidelines. The turnover must not exceed 22,000 euros in the last year and the 50,000 euros limit in the current calendar year . However, if several companies are managed by the small business regulation, then the general turnover for all companies still counts together and not individually. This means that the turnover of all companies must not exceed the turnover limit.
The bottom line on the small business clause
The small business clause is an important part of the small business regulation according to § 19 UStG and defines the specific guidelines that describe whether a company can still be viewed as a small business or not. It always depends on the turnover that could be booked in the current calendar year and in the previous year. It is worthwhile to familiarize yourself with this clause and to consider it with regard to your own small business. In this way, they can be optimally applied to your own company.
