Small business regulation after 2 years

[Julia2727]

Hi,

I am looking for answers in the Kleinunternehmen regulation. I registered as self employed in 2022. At the time of registration, I waived the small business regulation and reported a sales tax (VAT) for the following 2 years (2022 and 2023).

In May 2024, I realized that I wanted to get rid of paying VAT. I was not very careful with my research unfortunately, so I just sent an informal letter to my tax office, saying I want to revoke my waiver of small business regulation for 2024. Since my 2023 turnover was lower than 22000 and 2024 expected turnover will be lower than 50000, I thought I have the right to do so.

But now I am reading that I am binded by my initial decision for 5 years. Does this mean that I can't apply the small business regulation? Nevertheless, the tax office didn't confirm or deny my application. They just said they can't send me any official confirmation.

I also read conflicting reports from courts and etc. One of them said I have the right to revoke my waiver even before the 5 year period is over. But then I have to repay the input sales tax for previous 2 years to the tax office , but only if it exceeded 1000 euros. For me, it didn't exceed 1000 euros.

I also read that revocation can only be applied starting next year. And not this year.

So my question is if I can use the small business regulation in 2024 or not. I issued only two invoices this year in total. I didn't invoice VAT to clients on these invoices. And now I am worried I am doing something wrong. My calls with the tax office are very confusing. One day they confirm over the phone that I can use the regulation this year, another day they say that they can't send me an official confirmation. But again I also read that they don't have to send the confirmation and my annual Vat and tax returns will be decisive.

Any advice on that matter? I am sorry if may be I overcomplicated it unnecessarily.

Thank you,
Julia

[PandaMunich]

I am looking for answers in the Kleinunternehmen regulation. I registered as self employed in 2022. At the time of registration, I waived the small business regulation and reported a sales tax (VAT) for the following 2 years (2022 and 2023).

In May 2024, I realized that I wanted to get rid of paying VAT. I was not very careful with my research unfortunately, so I just sent an informal letter to my tax office, saying I want to revoke my waiver of small business regulation for 2024. Since my 2023 turnover was lower than 22000 and 2024 expected turnover will be lower than 50000, I thought I have the right to do so.

But now I am reading that I am binded by my initial decision for 5 years. Does this mean that I can't apply the small business regulation?

Have you already filed your 2022 VAT return (Umsatzsteuererklärung)?
Because you have up till one month after you filed it (which is when it becomes uncontestable), to still change your mind about being a Kleinunternehmer, that's what is written in § 19 (2) Satz 2 UStG: https://dejure.org/gesetze/UStG/19.html

• 2Nach Eintritt der Unanfechtbarkeit der Steuerfestsetzung bindet die Erklärung den Unternehmer mindestens für fünf Kalenderjahre.

• 2Once the tax assessment has become incontestable, the declaration shall be binding on the entrepreneur for at least five calendar years.

If more than 1 month has elapsed since you filed your 2022 tax return, then you are bound to you decision to waive your Kleinunternehmer status for 5 years, i.e. for 2022, 2023, 2024, 2025 and 2026.
--> you can then tell the Finanzamt that from 1. January 2027, you will return to being a Kleinunternehmerin.

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Who are your clients?
Are they non-German businesses?
Because if they are, you weren't supposed to charge VAT in your invoices.
For EU businesses, you will need to prove that they are a business by checking their VAT ID number in the VIES VAT number database: https://ec.europa.eu/taxation_customs/v ... validation

[Julia2727]

Thank you! Yes 2022 VAT return has been filed. So I will stick to standard taxation. It really confused me that the tax office person said she saw my application for Kleinunternehmen and I can be a small business from this year but then didn't provide any letter. I think they just didn't check my business registration date.

My clients are mostly in Germany.

Just one more admin question: shall I send the finanzamt the letter stating that my kleinunternehmen application was a mistake? Or is it not necessary and eventually they will see my tax returns and VAT returns with standard taxation? I am thinking I would just continue sending my reports and they will figure it out.

Anyways, thanks a lot for your help, @PandaMunich. It suddenly became very clear to me what to do! I really appreciate it.

Julia2727

[PandaMunich]

Just one more admin question: shall I send the finanzamt the letter stating that my kleinunternehmen application was a mistake? Or is it not necessary and eventually they will see my tax returns and VAT returns with standard taxation?

The latter, you simply file as VAT-charging.

You will have to either:

• re-issue these two invoices you write with VAT (if the clients are businesses, it's not a problem for them to pay VAT extra, since they will get that VAT back),
  or
• you will need to pay VAT from the invoiced amount, i.e. only get to keep amount/1.19.

You should have been filing quarterly VAT announcements and should have been forwarding this VAT to the Finanzamt's bank account unasked (best to give the Finanzamt a SEPA Lastschriftmandat so that they can simply take the due tax from your bank account).
Did you not file these VAT announcements in 2024?

[Julia2727]

Thank you!

Yes I think I will just change my invoices to include VAT and pay it.

Regarding quarterly VAT reports, I didn't send them. At the begining of the year I got a letter from the Finanzamt to file VAT annually because last year's VAT was less then 1000. Recently on 31 July 2024 they sent me a letter to send quarterly VAT returns. That was quite late and I was still trying to clarify if I was a small business or not. So as it happened, I didn't file for the first 2 quarters. Now I am super late with the two reports. That's okay though and I am okay to take on the penalties and fines if any.

They have my SEPA mandate!

Thank you again @PandaMunich!
Julia2727