Small-business VAT scheme

The small-business VAT scheme is a choice in VAT law for the self-employed with low turnover. Anyone who uses it does not charge VAT on invoices and does not have to remit it — but in return loses the right to claim input VAT paid.

What changes on the invoice

Without the scheme every invoice contains net, tax and gross. With it only one amount stands there, plus a note that no VAT is charged. The advance returns fall away; the effort drops clearly. That is the practical advantage, especially in the first year and in a side activity.

Whether you meet the conditions hangs on turnover thresholds. These thresholds are regularly adjusted, which is why they are not quantified here. The currently applicable values are named by the tax office and tax advice; they are also the measure of whether you fall out of the scheme in the current year.

The decisive question is who your client is

The advantage of the scheme is that your service becomes cheaper for the client. That only works, however, with clients who cannot themselves deduct the VAT — that is, private individuals. If you sell directly to end customers, for example through a fan platform or with individual bookings, the price advantage is real.

Production companies, by contrast, are as a rule entitled to deduct input VAT. For them the charged VAT is neutral: they pay it to you and reclaim it from the tax office. Your net fee does not become more attractive. Anyone who works mainly for productions therefore has no advantage with the client from waiving VAT — but carries the disadvantage of the missing input-VAT deduction alone.

When waiving the scheme can make sense

• You invest at the start in equipment, a website or professional recordings and would get considerable input VAT refunded for that.
• Your clients are mainly businesses to whom the tax is indifferent.
• You expect to exceed the turnover thresholds soon anyway and want to avoid the switch in the middle of the year.
• You work with foreign platforms to which special VAT rules apply.

The bind after the switch

Waiving the small-business scheme is not a trial. Anyone who chooses regular taxation is bound to it for several years and cannot switch back the next year because the investments are done. The exact duration of the bind and the form of the declaration are set by the tax office.

Calculate the decision therefore over several years, not over a month. The basis for that is your planned expenses, your client structure and the mechanics of VAT. How registration, bookkeeping and returns hang together is shown in the article trade and tax for performers.

This entry places the choice in context and is not a substitute for tax advice. The decision itself belongs professionally reviewed, because it works over several years.