Kleinunternehmer unexpectedly exceeded 50k - VAT

15 posts in this topic

Hello,

I am running an UG (sole proprietor) and opted-in "Kleinunternehmer".

Last 3 years there was no activities with sales didn't exceed 5K€/year.

This year, I was expecting in sales (Online cloud services) less than 50K, and I didn't charge my clients VAT according to § 19 UStG. However, upcoming months, unexpectedly, I might exceed 50K by 5-10K.

My questions:
- I know that I will lose the "Kleinunternehmer" status and I am aware that I will add VAT to the invoices. But how to deal with the old invoices? I can't contact old clients or reissue the invoices with VAT. Will I still be questioned about the previously issues invoices?

Let me know your thoughts.

Thanks in advance.

Side note:
- I also work as a full-time employee and my employer aware of my other activities without conflict.

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4 hours ago, SlashVortal said:

I know that I will lose the "Kleinunternehmer" status and I am aware that I will add VAT to the invoices.

 

If you can prove that your realistic expectations at the start of 2021 were, that you would not exceed the 50,000€ turnover limit in 2021 (and that is the case, after all in the past years before, you had a very low turnover), then it will not be a problem

--> you will only lose Kleinunternehmer status on 31. December 2021 and will start charging VAT starting with 1. January 2022.

 

Please note that if your clients are EU private citizens and what you are providing are "electronically provided services" (= provided without human interaction, e.g. software downloads), and your sales to EU private citizens exceeded 10,000€ per year, then since even though your UG is a Kleinunternehmer within Germany, for international business you get treated as a "normal" VAT-registered business and you therefore should have been charging your EU private citizen customers their local home country's VAT rate, up till 30. June 2021 via the MOSS (mini one-stop-shop), starting with 1. July via the OSS (one-stop-shop): https://www.bzst.de/DE/Unternehmen/Umsatzsteuer/One-Stop-Shop_EU/one_stop_shop_eu_node.html

 

Sales of "electronically provided services" to non-EU private or business clients would also carry the VAT rate of the country of the client, you would need to check for each country whether they charge VAT and whether you owe them VAT even at your volume of sales.

 

If your clients are EU businesses, you should have been asking them for the VAT-ID numbers and should have been issuing reverse charge invoices without VAT for your services, in which you mention both your German VAT-ID number and that EU business' VAT-ID number: 

Sales of "electronically provided services" to non-German customers do not "count" towards the Kleinunternehmer turnover limit. 

 

*******************************************************************

 

I'm puzzled, with an UG you will have a Steuerberater for sure.

So why not ask him these questions?

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@PandaMunich Thanks a lot for your detailed response. That makes totally sense!
I'm currently working with a digital Tax-advisor-based service, such as FreeFibu and P8 for bookkeeping (which has been started last week when I started getting more projects). I opted in to get tax advice directly when my situation changed. However, due to their heavy workload this month, it is becoming hard to get an appointment in the upcoming weeks.
 

- I am a software developer and delivering online services such as web-development and marketing (I invoice get paid when I finish the work and deploy). Does that counts as "electronically provided services"?

- 90% of my clients are Canada, UAE and UK based clients. e.g., 35k from the turnover are from those clients, and I'm issuing proper invoicing with VAT exception according to § 19 UStG with a disclosure for both (Kleinunternehmer & umsatzsteuerfrei) and keeping all records of their VAT-ID. How does that count towards the 50K turnover limit?

thanks a lot again!

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@PandaMunich Oh, looking at your profile, I just realised I tried to contact you outside days ago to get a tax advise but you were overbooked. I still hope I can get a proper tax advice as i have more questions, maybe it is too much to be discussed in a forum thread 🙌. I find difficulties to get a long-term tax advisor during this time. Thank you again for putting time to help the members here!

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2 hours ago, SlashVortal said:

- I am a software developer and delivering online services such as web-development and marketing (I invoice get paid when I finish the work and deploy). Does that counts as "electronically provided services"?

 

"Electronically provided services" would be you selling the same app to thousands of people, who simply download it automatically, with no interaction with a human, i.e. with no interaction with you.

 

But from what you write, it sounds more like you make websites "to order", i.e. you communicate with the client and then individually program each website according to the client's wishes.

That would not be "electronically provided services, but "normal" services.

 

2 hours ago, SlashVortal said:

- 90% of my clients are Canada, UAE and UK based clients. e.g., 35k from the turnover are from those clients, and I'm issuing proper invoicing with VAT exception according to § 19 UStG with a disclosure for both (Kleinunternehmer & umsatzsteuerfrei) and keeping all records of their VAT-ID. How does that count towards the 50K turnover limit?

 

For "normal" services, the following rules apply:

  1. within Germany (German business or private client) and EU private client and non-EU private client: invoice with no VAT and §19 UStG Kleinunternehmer sentence to explain why you are not charging VAT
  2. EU business client: if you applied for a VAT-ID number at the Bundeszentralamt für Steuern (it is handed out centrally by one place in Germany) and also know the EU business client's VAT-ID number, you write both into an invoice without VAT, do not charge VAT and write "Reverse Charge" on the invoice as the explanation why you are not charging VAT. You need to check the VAT-ID number every time before you write a reverse charge invoice here and save a pdf of the result of the query.
    If you do not know their VAT-ID number, you have to treat them as EU private persons, i.e. case 1.
  3. non-EU business client: invoice without VAT.
    If it is a UK business client, check their UK VAT-ID number here, save a pdf of the result as proof and also write "Reverse Charge" on the invoice, they maintained that despite Brexit.
    For other non-EU business clients, proving they are a business is easy if they have a company form, e.g. Inc., Corp., LLC.
    If they don't have a clear "company" form, you had better treat them as non-EU private persons, i.e. as case 1, since you will not be able to prove to the Finanzamt that they are a non-EU business.

The turnovers under numbers 2 and 3 do not count towards the Kleinunternehmer limit, so you could have earned 200k€ from EU and non-EU business clients and as long as your "case 1 turnover" remains under 22,000€ you can remain a Kleinunternehmer indefinitely.

 

Though you may want to think about voluntarily opting out of being a Kleinunternehmer.

You would then have to charge 19% VAT on the "case 1 turnover" and file quarterly VAT announcements and quarterly EC Sales Lists (= Zusammenfassende Meldungen), but in exchange you would get back the VAT on items/services that you bought for your business (if the invoice is in your UG's name), e.g. also on your Steuerberater invoices issued to the UG.

 

2 hours ago, SlashVortal said:

@PandaMunich Oh, looking at your profile, I just realised I tried to contact you outside days ago to get a tax advise but you were overbooked. I still hope I can get a proper tax advice as i have more questions, maybe it is too much to be discussed in a forum thread 🙌. I find difficulties to get a long-term tax advisor during this time. 

 

Sorry, but not me, I even write on my website that I no longer accept clients ;-)

If you are who I think you are, that website update was done after you had contacted me near the end of August.

I updated my website with that note after the 2019 filing deadline of 31. August 2021 had passed and I had a bit of breathing space again, to avoid future phone calls like that from a gentleman, who, going by his accent, hails a few thousand km east of from where you hail, who had called me right before the deadline and simply wouldn't understand that "no capacity" means "no capacity".

 

2 hours ago, SlashVortal said:

Thank you again for putting time to help the members here!

 

You are actually profiting from the fact that I am feeling a bit under the weather at the moment (note to self: wearing a top and shorts is not a good idea when it's 10°C outside, no matter how sunny it is!) and I would risk making a mistake if I start on more complicated client work in my present state.

So I am procrastinating and passing the time until I feel better.

Enjoy it while it lasts, the being overworked part wasn't a joke, as soon as I feel better, I will be back to my work.

 

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@PandaMunich That makes sense. Thanks a lot.

With the mixture of my EU and non-EU clients and the consideration of (1st, 2nd, and 3rd rules), I believe I'm still able to maintain my Kleinunternehmer status.

 

- Is it true that I can't pay myself dividends/distribution during my first profitable year?

I didn't pay myself yet. I know that I can do it through Datev, but I learned that it is not allowed to do it this year.

 

- Since I'm working as a full-time employee with another company and contributing to my health insurance when paying a dividend and considering the capital gains tax, do I have to pay more for the health insurance as an extra income?

My basic calculation shows I will pay 25% percent in tax on dividends. I assume when the 75% reaches my account I have to pay an additional health insurance contribution. Is there any additional tax on this income?

 

Still burning to find a tax advisor to help me settle.

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2 hours ago, SlashVortal said:

- Is it true that I can't pay myself dividends/distribution during my first profitable year?

I didn't pay myself yet. I know that I can do it through Datev, but I learned that it is not allowed to do it this year.

 

In general terms:

If after deducting the loss you carried forward from the earlier years, there is still profit left, you have to put 25% of that remaining profit into the UG's capital, until you have reached 25,000€ of capital, see §5a (3) GmbHG: https://dejure.org/gesetze/GmbHG/5a.html

After you have reached 25,000€ capital, you can turn your UG into a GmbH, but you don't have to.

The rest:

75%*(profit_2021 - accumulated_losses_from_earlier_years)

you could distribute, if you only go by the above article of law.

However, it isn't that simple.

 

To get a first idea, look at the example with numbers in here: https://www-firma-de.translate.goog/rechnungswesen/gewinnverteilung-bei-gmbh-ug-das-ist-zu-beachten/?_x_tr_sl=de&_x_tr_tl=en&_x_tr_hl=en-GB&_x_tr_pto=nui,elem

 

Sadly, that example has some mistakes in it and also "forgets" about a few taxes.

 

A correct example would be:

110,000 profit 2021

- 10,000 losses from past years

___________________________________

= 100,000€ remaining profit 2021 (= Steuerbilanzgewinn)

- 25,000€ = 0.25*100,000€ mandatory contribution to UG's capital

- 15,825€ = 15.825%*100,000€ Körperschaftsteuer + Soli (15% KSt + 5.5%*15% Soli)

- 15,400€ = 15.4%*100,000€ Gewerbesteuer, if your UG has its seat in a town with a Gewerbesteuerhebesatz of 440% 

___________________________________

= 43,775€ gross dividend = money left. You can't distribute more than you've got left...

- 11,545.66€ = 26.375%*43,775€ Kapitalertragsteuer and Soli on your distribution, which your UG has to retain at the source and forward to the Finanzamt. At the same time, it issues you a certificate called Steuerbescheinigung stating that this tax has already been paid "for you".

__________________________________

= 32,229.34€ is what you really get

 

2 hours ago, SlashVortal said:

- Since I'm working as a full-time employee with another company and contributing to my health insurance when paying a dividend and considering the capital gains tax, do I have to pay more for the health insurance as an extra income?

My basic calculation shows I will pay 25% percent in tax on dividends. I assume when the 75% reaches my account I have to pay an additional health insurance contribution. Is there any additional tax on this income?

 

In your income tax return, you have to pay either:

  • 26.375% (income tax plus Solidaritätszuschlag) on the gross dividend 43,775€, or
  • you opt to pay your personal variable income tax rate of up to 42% (plus Soli) on 60%*dividend

For an example with numbers showing both alternatives, please see here: https://www-firma-de.translate.goog/rechnungswesen/gewinnausschuettung-und-besteuerung-einer-gmbh/?_x_tr_sl=de&_x_tr_tl=en&_x_tr_hl=en-GB&_x_tr_pto=nui,elem

 

In both alternatives, you show the Finanzamt the Steuerbescheinigung issued by the UG for those 11,545.66€ the UG had retained from the dividend, and your tax burden will be reduced by 11,545.66€.

 

*************************************************

 

As long as you earn more gross salary from being an employee than the gross dividend and you work more hours as an employee than for your UG, you will remain a mandatory member of public health insurance, i.e. they will leave you alone.

As a mandatory member, the public health&nursing contribution that you pay via your salary is all you have to pay.

 

If you should no longer fulfill the above conditions, you will become a voluntary member and will have to pay public health&nursing contributions on your worldwide income, including on that gross dividend.

 

But the public health insurances only charge up to a monthly limit called Beitragsbemessungsgrenze (in 2021: 4,837.50€ per month): https://de.wikipedia.org/wiki/Beitragsbemessungsgrenze#Gesetzliche_Kranken-_und_Pflegeversicherung

So if your salary is already over the Beitragsbemessungsgrenze, you are already paying the maximum possible contribution.

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@PandaMunich Thanks a lot for the detailed answers! 💙 That helped me a lot with all my concerns at this level. I will look into more details of the shared links and learn more.

So far the only thing I'm doing now through a cloud-based tax advisor service is bookkeeping. Until I find a tax advisor who can accept me, I think I'm totally blocked to pay myself in a proper way to avoid any possible mistake.
 

Please keep me in mind whenever you have the capacity. I will make sure to not bothering you with these kinds of dummy questions as they are a result of confusion and the fear of doing any mistake.

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2 hours ago, SlashVortal said:

Still burning to find a tax advisor to help me settle.

 

41 minutes ago, SlashVortal said:

@PandaMunich Thanks a lot for the detailed answers! 💙 That helped me a lot with all my concerns at this level. I will look into more details of the shared links and learn more.

So far the only thing I'm doing now through a cloud-based tax advisor service is bookkeeping. Until I find a tax advisor who can accept me, I think I'm totally blocked to pay myself in a proper way to avoid any possible mistake.
 

Please keep me in mind whenever you have the capacity. I will make sure to not bothering you with these kinds of dummy questions as they are a result of confusion and the fear of doing any mistake.

 

FreeFibu is actually a Steuerberater company, see here for their pricing: https://www.freefibu.de/preise/fuer-gmbhs-ugs/

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@PandaMunich I'm not with them anymore. I didn't want to mention the company, but currently working with P8, and they are so far very slow in response, I have already ordered packages for advice through firma.de last 2 weeks and never get any follow-up. I was even not fully onboarded on their Datev but found my way learning from the docs. I had experience with both. There are cons pros for FreeFibu as well. However, each time I contact them I get random Steuerberater assigned to my case, and every time I have to start from scratch with the onboarding (explaining the situation) and I lose hours of unnecessary chats over the phone without solid/written advice, until I opted-out last year. I also had bad experience with other topics.

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9 hours ago, SlashVortal said:

I didn't want to mention the company, but currently working with P8

 

Who are they?

I know about 8P, that's a Steuerberater company.

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@PandaMunich I mean I didn't want to mention the name of the Steuerberater company at the beginning. Yes P8 is the current one but very slow in response. Today only I received punch of documents to sign prior starting any tax advise which is expected. I hope I will get a dedicated Steuerberater till I settle down at list. I can forward you the email if that makes sense. Maybe a quick advise if I'm going in the right direction? Happy to work with you on general pieces of tax advice if that makes sense. I know you are overbooked but maybe we can find a way to work together along P8?!

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1 hour ago, SlashVortal said:

I hope I will get a dedicated Steuerberater till I settle down at least.

 

You need to manage your expectations.

 

Steuerberater are at the top of the pyramid, below them (at about a ratio of 1 to 5 in bigger companies) are (in ascending level of competence): Steuerfachangestellte, Bilanzbuchhalter and Steuerfachwirte.

The first two have a 3 year apprenticeship.

A Steuerfachwirt has a 3 year apprenticeship, plus he/she has additionally needed to prove several years of practice and has passed an additional exam, i.e. he/she is what the "Meister" is in the Handwerk, the best there is, next to a Steuerberater.

With an UG, if you're lucky, you will get a dedicated Bilanzbuchhalter, otherwise a Steuerfachangestellte.

 

The only time a Steuerberater will look at your case will be at the very end, to check the work of the employee.

 

1 hour ago, SlashVortal said:

Maybe a quick advise if I'm going in the right direction? Happy to work with you on general pieces of tax advice if that makes sense. I know you are overbooked but maybe we can find a way to work together along P8?!

 

No, sorry, as I said before, answering here is just a distraction, until I shake off this cold.

Once I'm back to normal, I have plenty of my own work to do and really have no time to take on any additional work.

 

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On 9/21/2021, 10:56:49, PandaMunich said:

A correct example would be:

110,000 profit 2021

- 10,000 losses from past years

___________________________________

= 100,000€ remaining profit 2021 (= Steuerbilanzgewinn)

- 25,000€ = 0.25*100,000€ mandatory contribution to UG's capital

- 15,825€ = 15.825%*100,000€ Körperschaftsteuer + Soli (15% KSt + 5.5%*15% Soli)

- 15,400€ = 15.4%*100,000€ Gewerbesteuer, if your UG has its seat in a town with a Gewerbesteuerhebesatz of 440% 

___________________________________

= 43,775€ gross dividend = money left. You can't distribute more than you've got left...

- 11,545.66€ = 26.375%*43,775€ Kapitalertragsteuer and Soli on your distribution, which your UG has to retain at the source and forward to the Finanzamt. At the same time, it issues you a certificate called Steuerbescheinigung stating that this tax has already been paid "for you".

__________________________________

= 32,229.34€ is what you really get


What is the proper tool/way to pay the dividends?
Currently, I'm maintaining the bookkeeping through LexOffice. Is it something I have to wait for my Steuerberater only to execute or I can do it without going back to the Steuerberater every time I do it? I can't find how to forward the Kapitalertragsteuer and Soli to the Finance amt.

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LexOffice is just an accounting software and cannot do Kapitalertragsteuer announcements: https://www.haufe.de/finance/haufe-finance-office-premium/kapitalertragsteuer-6-entstehung-anmeldung-und-abfuehrung_idesk_PI20354_HI6445991.html

 

You could do it via Elster, but better wait and let your Steuerberater do it: https://www.elster.de/eportal/formulare-leistungen/alleformulare/kapesta

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