Info about the small business regulation
This page is only relevant to you, if you are selling from within the EU.
In many European countries, there is a so-called small business regulation, which is intended to relieve bureaucracy for small businesses with low sales. Here you can find out what exactly the small business regulation is and how you can apply it to your sales at Tentary.
What is the small business regulation?
Basically, the small business rule exempts you from paying sales tax. You don't have to pay sales tax on your sales, but at the same time you don't get any input tax back from the tax office.
In Germany, the criteria for the small business regulation are defined as follows via § 19 UStG:
- Any freelancer, entrepreneur and self-employed person who generated a maximum of €22,000 in sales in the previous fiscal year and whose sales in the current fiscal year are not expected to exceed €50,000 in sales can participate.
- There is an option for participation. If the small business regulation is waived, this exclusion is binding for at least five calendar years.
Whether the small business regulation is worthwhile for you depends on your individual situation and cannot be answered in a general way. Reasons that are often given as arguments are the partly lower administrative effort and the possibility to offer products to private persons at a lower price (because without sales tax). The counter-argument is the non-existing input tax deduction for investments and other expenses.
Special feature for sales to other EU countries
Within Europe, however, purchases of digital products by private individuals are taxed in the country of the purchaser above a certain limit (
see OSS procedure). Since the small business regulation is a local regulation of a country, this results in a special case where the EU regulation takes precedence. If you participate in the so-called OSS procedure voluntarily (or are obligated by exceeding the
OSS turnover limits), VAT is due on sales to other EU countries. If you do not participate, the small business regulation applies, and you do not pay VAT on sales in your home country and in other EU countries.
Small business regulation on Tentary
At Tentary you can easily indicate whether you fall under the small business regulation or not.
To do so, log in to your Tentary account and go to the settings page to edit your
invoice settings.
In the invoice settings, activate the option: "I am not subject to VAT in my own country (e.g. small business regulation)". This option is only available if you are selling from within the EU.
After activation, you should see a new field that allows you to define a hint text for your invoices. This text will be displayed to your customers in the purchase process and on invoices. The text is not legally required, but it prevents misunderstandings among buyers.
Note: we do not provide tax advice. Please contact your tax advisor for details.