Self-employed, freelancers or entrepreneurs are usually subject to sales tax according to the sales tax law. Entrepreneurs within the meaning of the law are people who carry out a commercial or professional activity independently in order to generate sustainable income. […]
Self-employed, freelancers or entrepreneurs are usually subject to sales tax according to the sales tax law. Entrepreneurs within the meaning of the law are people who carry out a commercial or professional activity independently in order to generate sustainable income. In contrast to income tax, there is no intention to make a profit. Find out the most important facts about sales tax here.
The Value Added Tax Act (USTG): Basis for taxable and tax-free services and deliveries
Services or deliveries that you, as an entrepreneur, carry out in Germany for a fee are subject to sales tax. In addition, the USTG in Germany also regulates intra-community acquisitions in Germany and the import sales tax for deliveries from other countries. The USTG describes these sales as taxable sales.
The obligation to register in advance
The sales tax is an annual tax. Nevertheless, entrepreneurs are obliged, under certain conditions, to submit an advance notification and to make advance tax payments. This is regulated in the USTG:
- If the sales tax paid for the previous calendar year is less than 1,000 euros, the responsible tax office can issue an exemption from prior notification and advance payment.
- If the sales tax is above this amount, you are obliged to calculate your sales tax every quarter, to report it to the tax office by the 10th day of the pre-registration period and to make the advance tax payment.
- If the sales tax in the previous calendar year was more than 7,500 euros, submit your monthly advance notification and make your monthly advance payment.
Small businesses whose annual turnover does not exceed 17,500 euros are exempt from tax liability upon application.
Sales tax and input tax – the so-called “transitory” items
The VAT you charge your customers is not part of your income. It is a tax liability towards your tax office. You can offset the VAT you have paid yourself with the input tax deduction. For this reason, sales tax and input tax are referred to as transitory items by business people, because they do not increase or decrease your own profit.