Which services are exempt from VAT

Sales tax exemption: who does it apply to?

The legislator makes exceptions, also with the sales tax. Some self-employed and especially many small businesses work temporarily or permanently with a sales tax exemption. This means that you do not need to add sales tax to your bills. You don't have to make advance sales tax returns and you don't have to pass the tax on to the tax office.

Actually, all companies are subject to sales tax. Sales tax is a direct tax that companies collect on sales made and pass on to the tax office.

How does the VAT exemption through the small business regulation work?

Small business owners are not actually exempt from sales tax, but they can do without it. The small business regulation is a simplification regulation that aims to make it easier for founders and tiny businesses to work with tax and accounting. Receiving no sales tax, however, also means not being able to claim input tax.

In addition, the small business regulation is tied to turnover limits: a small business owner may not have turned over more than 22,000 euros in the previous year. However, the sales limit is a gross amount: Here sales tax is included even though it was not incurred. For a small business owner whose services would theoretically be calculated at a tax rate of 19%, this means: at around 14,700 euros, that's the end. Because this amount plus the sales tax remains just below the sales limit for the small business regulation. But you don't have to remain a small business owner. The Exceeding the sales limit has an effect from the following year: You switch to regular taxation and then have to add sales tax or value added tax to your invoices.

But there are also other forms of VAT exemption. And they are not linked to sales.

VAT exemption: who or what does it apply to?

Self-employed teachers at educational institutions belong to the tiny group of those who can generally be exempt from sales tax. Either the educational institution as the client or the teacher himself must be exempted accordingly. Section 4 of the Value Added Tax Act regulates which educational institutions this applies to. This is a paragraph many paragraphs. It lists the transactions and transactions that are not subject to VAT.

Education is not the only good that VAT exemption aims to promote. An exemption also applies where it simplifies administrative processes, i.e. at state institutions. The sales tax-free sales include, for example, medical treatment by doctors and dentists or payments from renting and leasing. The purchase or sale of real estate is also part of it, because it falls under the Land Transfer Tax Act, so the tax levied is different in this case. Goods and services that would otherwise be taxed twice and things that are important for the common good, such as healthcare, art, culture and education, are in part exempt from sales tax.

Culture and education - VAT exempt

The types of institutions that can benefit from a VAT exemption include museums and chamber orchestras, for example.

Educational institutions are general schools and substitute schools, which, for example, provide evening courses for school-leaving qualifications. The tax office can also grant a VAT exemption for adult education centers and educational institutions that prepare for professional exams. Educational institutions can have a certificate issued for this at the responsible tax office every year and distribute copies of it to the honorary staff they have commissioned with the courses. Teachers themselves can also apply for an exemption for their educational offer.

Customers with VAT exemption: What do you have to do as a contractor?

It is important to note the reason why no sales tax is levied on the invoice to an educational institution that is exempt from sales tax. In addition, the certificate of exemption should be kept in a safe place in case the tax office asks. This is particularly unusual for those who only work occasionally for educational institutions. But if the receipt is missing at the end, a taxpayer cannot prove why this one order with an educational institution for a lecture series was billed without sales tax, if someone from the tax office wants to know. If it goes stupid, it may be that sales tax is claimed from the tax office - that would then reduce the fee enormously.

tip: Always ensure that the educational institution really has a currently valid VAT exemption and file a copy of the sales tax exemption receipt with the invoice. Anyone who works exclusively as a freelance teacher should also always include the certificates with the documents and keep them in a safe place.

Caution: Even if you are exempt from sales tax, you should find out about other corporate taxes that are relevant to you.