Dear Clients,
At the beginning of July 2024, the Tax Amendment Act 2024 was passed in the Austrian National Council. This law contains significant changes for small businesses in the area of VAT.
What is a small business owner?
A small business owner is an entrepreneur who operates his business in Austria and whose turnover does not exceed EUR 35,000 (net) in a calendar year. Certain sales are not included in this turnover limit, e.g. ancillary businesses, sales of businesses, certain tax-exempt sales. Exceeding the turnover limit once by no more than 15 % within a period of five years is also irrelevant.
Small entrepreneurs invoice their services without VAT, on the other hand they are not entitled to deduct input tax.
Cross-border small business exemption
Companies based in Austria can make use of the small business exemption in other EU member states from 2025.
Conversely, the small business exemption is also available to foreign entrepreneurs who do not operate their business in Austria but in another member state upon application in Austria.
The prerequisite for this is, in particular, that the EU-wide annual turnover in the previous year and in the current year does not exceed EUR 100,000.
Extension of simplified invoicing for small businesses
From 2025, small businesses subject to VAT will be able to issue simplified invoices regardless of the amount shown on the invoice.
Turnover limit and the tolerance rule
Until now, the turnover limit of EUR 35,000 was to be understood as a net limit. From 2025, the small business limit will be a gross limit and the amount will be raised from EUR 35,000 to EUR 42,000. As a result, however, the turnover limit will not change.
The Austrian federal government has announced that it will raise this turnover limit to EUR 55,000.
Furthermore, the tolerance regulation will be adjusted so that from 2025, exceeding the turnover limit once by no more than 10 % (instead of the previous 15 %) within a period of five calendar years will be harmless. Unlike previously, exceeding the turnover limit (taking into account the tolerance rule) will no longer have an effect back to the beginning of the year. The small business exemption will cease to apply as of the amount of sales or in the month in which the sales limit is exceeded (taking into account the 10 % tolerance rule).
Best regards
Manfred Gross
Vienna, September 2024
