VAT relief and light entrepreneurship
Value added tax is a flat tax added to the price of almost all services and products, which all VAT-liable companies charge their customers and pass to the tax authorities. If a company’s revenue remains small, then the VAT-liable company may benefit from VAT relief.
What is VAT relief?
VAT relief is a tax relief for small businesses in the VAT register. With VAT relief, some or all of the VAT paid by the company is returned to the company.
Can a light entrepreneur get VAT relief?
Generally, companies with a revenue of less than €15,000 in the accounting period do not need to join the VAT register, unless they volunteer to do so. So how does the light entrepreneurs’ VAT obligation work, and can they get VAT relief?
The minimum limit mentioned above does not apply to light entrepreneurs, as they invoice under the light entrepreneur service’s business ID. VAT liability comes from the light entrepreneur service’s revenue, even if you do not charge this much yourself. Light entrepreneurs being treated in accordance with the light entrepreneur service’s revenue also extends to VAT relief.
Due to this reason, light entrepreneurs cannot make use of VAT relief, as during calculations, the entire light entrepreneur service’s revenue under its business ID is counted.
Who can apply for VAT relief?
Any entrepreneur or company which belongs to the VAT register and whose revenue remains under €30,000 during the accounting period can apply for VAT relief.
Companies whose revenue is less than €15,000 during the accounting period will receive full VAT relief. In this case, all of the VAT paid by the company which entitles to VAT relief during the accounting period is returned to the company.
Companies whose revenue remains under €15,000 are not obliged to register in the VAT register, and thus the full VAT relief mostly applies to companies which have registered voluntarily.
How much is VAT relief?
The amount of VAT relief is calculated based on the revenue entitling to relief and the amount of the tax entitling to relief. You must report the above in your company’s VAT return.
Please note that the revenue entitling to relief and amount of tax entitling to relief are not necessarily the same as the amount of revenue or tax during the entire accounting period.
You can calculate the amount of revenue and tax entitling to VAT relief easily with the Tax Administration’s calculator. The calculator will directly list the revenue and tax to be taken into account in the relief.
When do you apply for VAT relief?
You apply for VAT relief through the VAT return. The time of applying for the relief depends on the length of the company’s VAT tax period.
If the length of your company’s VAT tax period is one month, the application for VAT relief should happen in connection with the VAT return made during the last month of the accounting period,.
If the VAT tax period of your company is one quarter-year, the application for VAT relief should happen in connection with the VAT return made during the final quarter of the calendar year.
If the VAT tax period is a full year, the application should happen in connection with the VAT return made for the entire calendar year.
How do you apply for VAT relief?
You can apply for VAT relief in accordance with the schedule mentioned above and the length of the company’s VAT tax period.
Applying for VAT relief requires the calculation of the revenue entitling to relief and the tax entitling to relief, as this information must be reported in the VAT return. This calculation can be done easily using the Tax Administration’s calculator.
VAT relief is taxable income, which you need to remember to report in the company’s accounting. In accrual-based accounting, VAT relief must be recorded as income for the accounting period in which the right to VAT relief is created. In cash-based accounting, this is recorded as income for the year of the actual return date.