Dear Clients,
From January 1st, 2025, significant changes for small businesses in the area of VAT will come into force in Austria, see also our newsletters “VAT - The new small business regulation (Kleinunternehmerregelung) starting from 2025” and “The Progression Compensation Act 2025”. We have summarised the most important changes for you below.
What is a small business owner? – The new turnover limit
A small business owner is an entrepreneur who operates his business in Austria and whose turnover in the current and previous calendar year does not exceed EUR 55,000 (gross).
Certain sales are not included in this turnover limit, e.g. ancillary businesses, sales of businesses, certain tax-exempt sales.
Small entrepreneurs invoice their services without VAT, on the other hand they are not entitled to deduct input tax.
The tolerance rule
The new tolerance rule allows small businesses to continue to benefit from the exemption until the end of the year, even if they exceed the turnover limit by up to 10 % (maximum EUR 60,500 gross). Exceeding this limit will result VAT-tax liability from the moment the limit is exceeded. Therefore no retroactive tax liability exists for past sales.
In the year in which the limit is exceeded both exempt and taxable sales can therefore be included in the VAT return.
Invoicing
From 2025, small businesses will be able to issue simplified invoices in line with the low value invoicing rules. These invoices will only require six items of information:
- the date of the invoice
- the name and address of the entrepreneur
- description of the service
- date/period of delivery or service
- the amount to pay and
- the tax rate.
On the invoice a reference to the tax exemption is mandatory: § 6 Abs 1 lit. 27 UStG (exemption for small businesses).
Cross-border small business exemption
Companies based in Austria can make use of the small business exemption in other EU member states from 2025 if the EU-wide annual turnover does not exceed EUR 100,000 and the respective national limits are complied with. An application via finanzonline is required.
Vice versa the small business exemption is also available to foreign entrepreneurs who do not operate their business in Austria but in another member state. It is necessary that their turnover in Austria does not exceed EUR 55,000, their EU-wide turnover does not exceed EUR 100,000 and an application has been submitted in their home country. These entrepreneurs receive a country-specific VAT number with the suffix '-EX'.
However entrepreneurs from third countries are still excluded from the regulation.
Waiver of tax exemption
Entrepreneurs will still be able to renounce their small business tax exemption for at least five years. The waiver must be declared in writing to the tax office by the time the VAT assessment becomes final.
Entrepreneurs who have a turnover of between EUR 42,000 and EUR 55,000 in the calendar year 2024 and who invoiced normally with VAT in 2024 but who are considered small entrepreneurs in 2025, have the following options:
- invoice as a small entrepreneur without VAT in 2025, provided that their turnover in 2025 is also less than EUR 55 000, or
- opt out of the small business scheme and invoice with VAT.
Best regards
Manfred Gross
Vienna, January 2025
