From when am I as an entrepreneur liable for value added tax?
April 9, 2024 | 45,00 EUR | answered by Emma Wagner
Dear tax consultant,
My name is Anna Ratzberg and I have been working as a freelance graphic designer for some time now. In the past few months, I have mainly offered my services to small businesses and private individuals. Now I am faced with the question of when I become liable for VAT as an entrepreneur.
So far, I have been working under the small business regulation and therefore have not shown VAT on my invoices. However, as my orders are becoming increasingly larger and I am also collaborating more with larger companies, I am wondering if I will soon become liable for VAT.
I am concerned that I may already be liable for VAT without knowing it, and that tax payments could be coming my way. Therefore, it is important for me to know exactly when I become liable for VAT as an entrepreneur and what steps I need to take in this case.
Could you please explain to me when I become liable for VAT as an entrepreneur and what impact this could have on my financial situation? Are there possibly ways to continue working under the small business regulation, or should I start preparing for the transition now?
Thank you in advance for your support.
Sincerely,
Anna Ratzberg
Dear Mrs. Ratzberg,
Thank you for your inquiry regarding your value added tax liability as a freelance graphic designer. It is understandable that you are concerned about when you will become liable for VAT as a business owner and what impact this could have on your financial situation. I will answer these questions for you as comprehensively as possible.
In general, business owners are liable for VAT if they have generated revenue of more than 17,500 euros in the previous calendar year or expect to generate revenue of more than 50,000 euros in the current calendar year. So, if you have increased your revenues in recent months and are working more with larger companies, you may soon exceed the threshold for VAT liability.
If this is the case, you will need to register with the tax office and start showing VAT on your invoices from that point on. This means that you will have to remit the VAT you receive from your customers to the tax office. At the same time, you also have the right to deduct the input tax you have paid for your business expenses from the VAT.
If you wish to continue operating under the small business regulation, you must ensure that you do not exceed the revenue threshold of 17,500 euros in the previous year or 50,000 euros in the current year. If you can already foresee that you will exceed this threshold, you should prepare for the transition and plan how to include VAT in your prices.
It is important that you inform yourself early on about your VAT liability and, if necessary, work with a tax advisor like myself to ensure that you comply with all legal requirements. Please do not hesitate to contact me if you have any further questions or need assistance with transitioning to VAT liability.
Sincerely,
Emma Wagner
