Insights
VAT
Turnover threshold for small‑business traders
From 1 January 2025 the turnover threshold for small‑business traders was increased from EUR 35,000 net to EUR 55,000 gross per year. For the calculation of this threshold it is not the receipt of the payment that matters, but when the relevant service was performed.
The small‑business trader scheme is a personal tax exemption whereby the trader does not have to charge or remit VAT, but on the other hand cannot claim input tax deduction on inputs. The current threshold of EUR 55,000 is a gross amount, from which VAT is no longer "back‑calculated", and it relates to the individual trader, not to individual activities or enterprises of the trader.
No retrospective taxation
Since 1 January 2025 the tax exemption remains in force for an excess of the turnover threshold of up to 10 % until the end of the calendar year (the small‑business exemption ceases in the following year) or, in the current year, only ceases with the turnover that exceeds the 10 % tolerance limit during the year. Only from that turnover and all subsequent turnovers is the small‑business tax exemption no longer applicable in that year. A retrospective taxation of turnovers back to the start of the year is no longer provided for, thereby reducing the administrative burden in the transition year.
Timing of service provision
From a temporal perspective, all turnovers for which deliveries or other services were performed in the assessment period are relevant for the calculation of the turnover threshold. Whether the small‑business threshold is exceeded therefore depends on the amount of fees for the services actually performed in the assessment period by the trader. For the calculation of the small‑business threshold it is therefore irrelevant when the fee is received. What matters is the services performed in the respective assessment period. Consequently, even in the case of cash‑basis accounting, for the calculation of the turnover threshold and thus for the test of whether the small‑business exemption applies, the timing of receipt of the fee is not decisive, but the timing of service provision. Under cash‑basis accounting, businesses must remit VAT to the tax office only when they have actually received payments from their customers.
Example
U taxes under the cash‑basis system. He provides services in 2025 for which he invoices EUR 40,000. In 2025 he receives only EUR 5,000 in revenue. The remaining EUR 35,000 is received in 2026.
For services provided in 2026 he invoices EUR 50,000, which are also fully paid in 2026.
Solution
The small‑business trader scheme applies in both years, because services worth EUR 40,000 are provided in 2025 and services worth EUR 50,000 are provided in 2026. The fact that EUR 85,000 in fees flow in during 2026 is irrelevant.
Tip
The ongoing check as to whether the small‑business threshold has already been exceeded can sometimes be complex. To avoid tax‑law defaults or even criminal‑tax consequences, you should consider using our advisory services.
No retrospective taxation
Since 1 January 2025 the tax exemption remains in force for an excess of the turnover threshold of up to 10 % until the end of the calendar year (the small‑business exemption ceases in the following year) or, in the current year, only ceases with the turnover that exceeds the 10 % tolerance limit during the year. Only from that turnover and all subsequent turnovers is the small‑business tax exemption no longer applicable in that year. A retrospective taxation of turnovers back to the start of the year is no longer provided for, thereby reducing the administrative burden in the transition year.
Timing of service provision
From a temporal perspective, all turnovers for which deliveries or other services were performed in the assessment period are relevant for the calculation of the turnover threshold. Whether the small‑business threshold is exceeded therefore depends on the amount of fees for the services actually performed in the assessment period by the trader. For the calculation of the small‑business threshold it is therefore irrelevant when the fee is received. What matters is the services performed in the respective assessment period. Consequently, even in the case of cash‑basis accounting, for the calculation of the turnover threshold and thus for the test of whether the small‑business exemption applies, the timing of receipt of the fee is not decisive, but the timing of service provision. Under cash‑basis accounting, businesses must remit VAT to the tax office only when they have actually received payments from their customers.
Example
U taxes under the cash‑basis system. He provides services in 2025 for which he invoices EUR 40,000. In 2025 he receives only EUR 5,000 in revenue. The remaining EUR 35,000 is received in 2026.
For services provided in 2026 he invoices EUR 50,000, which are also fully paid in 2026.
Solution
The small‑business trader scheme applies in both years, because services worth EUR 40,000 are provided in 2025 and services worth EUR 50,000 are provided in 2026. The fact that EUR 85,000 in fees flow in during 2026 is irrelevant.
Tip
The ongoing check as to whether the small‑business threshold has already been exceeded can sometimes be complex. To avoid tax‑law defaults or even criminal‑tax consequences, you should consider using our advisory services.