Guide

Small business VAT exemption, explained

Many countries let small businesses skip VAT. Here is how it works, what the thresholds are, and how to get your invoices right.

What is the small business VAT exemption?

Most EU countries offer a VAT exemption scheme for businesses with revenue below a certain threshold. If you qualify, you do not charge VAT on your invoices. That keeps your prices lower for end customers and saves you from filing VAT returns. The trade-off: you cannot deduct input VAT on your own purchases. Every country sets its own rules and thresholds, so the details depend on where your business is registered.

How to use the exemption

1

Check your eligibility

Look up the VAT exemption threshold for your country. In Germany it is 25,000 EUR (previous year) and 100,000 EUR (current year). In France it depends on whether you sell goods or services. Make sure your revenue falls within the limits.

2

Register properly

In most countries, you need to notify your tax office that you are using the small business exemption. Some apply it automatically, others require a formal election. Check with your local tax authority.

3

Add the required note to your invoices

Your invoices must not show a VAT amount and must include a note explaining why. In Germany, the standard wording is "Kein Ausweis von Umsatzsteuer gem. §19 UStG." Other countries have their own required phrasing.

4

Monitor your revenue

Track your annual revenue carefully. If you cross the threshold, you lose the exemption and must start charging VAT. In most countries this takes effect immediately or at the start of the next period.

General requirements

  • Your annual revenue must stay below the national threshold (varies by country)
  • You must be registered as a business in the country offering the exemption
  • Your invoices must not show any VAT amount
  • You must include a note on every invoice stating the exemption applies
  • You cannot deduct input VAT on business expenses while exempt
  • If you exceed the threshold, you must register for VAT and start charging it

Questions

Can I deduct input VAT while using the exemption?

No. If you do not charge VAT, you cannot reclaim it on your own purchases either. That is the main trade-off of the scheme.

What happens when I exceed the revenue threshold?

You lose the exemption and must register for VAT. Depending on the country, this can take effect immediately or at the start of the following year. You will then need to charge VAT on all future invoices.

What note do I need on my invoices?

The exact wording depends on your country. In Germany, the standard phrase is "Kein Ausweis von Umsatzsteuer gem. §19 UStG." In France, you would reference "TVA non applicable, art. 293 B du CGI." Check your local requirements.

Can I voluntarily opt into charging VAT?

Yes, in most countries you can choose to charge VAT even if your revenue is below the threshold. This makes sense if your clients are businesses that can reclaim VAT, since it lets you deduct input VAT on your own purchases. The opt-in usually binds you for several years.

Does Billstride support VAT-exempt invoices?

Yes. Set your VAT rate to 0% and add the required exemption note to your invoice. Billstride will not show a VAT line on the final document.

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