The turnover limit amount for small business with difference taxation must be clarified under EU law
by Elena Weismann in News from tax law
Sales by small business owners are not subject to VAT. Entrepreneurs are considered small businesses when their total turnover does not exceed € 17,500 in the previous calendar year and is not expected to exceed € 50,000 in the current calendar year. It is not clear which reference value is to be used when differential taxation applies.
The amount subject to the VAT is in the case of differential taxation not the sales price, but the difference between the purchase price and the sales price (gross margin). When questioning whether a trader falls under the small business rule the tax authorities take the sales price as the amount and not the total sum of the differences. There are considerable concerns about whether this view is compatible with EU law. The wording of the EU VAT Directive allows for the interpretation that only the sum of the calculated margins should be used for the turnover thresholds of the small business scheme. The German Federal Finance Court (Bundesfinanzhof) has referred this question to the Court of Justice of the European Union for clarification. His decision remains to be seen.