Value Added Tax: Who Qualifies and What You Get

Value Added Tax is a consumption tax applied to the goods and services sold by businesses within the country.

👤Who it's for

This scheme applies to businesses and freelance professionals who earn more than €22,000 per year. If your annual revenue stays below this specific threshold, you may not be required to register for this tax system. However, once your earnings exceed this amount, you must comply with the registration requirements set by the local tax office.

🎁What you get

The primary benefit of being registered is the ability to deduct the tax you paid on business equipment purchases. This process allows you to claim back the tax paid on items necessary for your work, such as professional tools or studio gear. In local terms, this deduction is referred to as Vorsteuer. By claiming this, you reduce the total tax burden of your business operations.

💰What it costs you

Being part of this system requires regular administrative work. You will be responsible for filing tax returns on a monthly or quarterly basis. This means you must keep detailed records of all your business transactions, including every sale made and every professional purchase made, to ensure your filings are accurate.

⚠️The catch to know

There is a specific rule regarding how you price your services: if you are required to charge tax, you must add 19% to your invoice price. This means your customers will see the tax added on top of your base rate. Additionally, you may need to obtain and use a specific tax identification number, known locally as a USt-IdNr, to ensure your invoices and business transactions are compliant.

📝How to apply

1. Calculate your total earnings to see if they exceed the €22,000 annual threshold.
2. Contact the local tax office to register your business for the tax system.
3. Request your specific tax identification number (USt-IdNr) if required.
4. Implement a method for tracking all business expenses and sales for your periodic returns.