Turnover threshold for small businesses

The Small Business Scheme is a personal tax exemption scheme. This means that, on the one hand, entrepreneurs do not have to charge or remit VAT. However, on the other hand, they cannot claim any input tax deduction on supplies they have received. The current threshold of €55,000 is a gross amount for which VAT is no longer deducted. It refers to the individual entrepreneur, rather than their activities or businesses.

No retroactive taxation

From 1 January 2025 onwards, if the turnover threshold is exceeded by no more than 10%, the tax exemption will remain in force until the end of the calendar year, resulting in the loss of the small business exemption the following year. Alternatively, the exemption ceases to apply from the transaction with which the 10% tolerance limit is exceeded during the year, only affecting the current year. The tax exemption for small businesses will not apply to this or any subsequent transactions within that year. However, retroactive taxation of turnover back to the beginning of the year is no longer permitted, reducing the administrative burden during the transition period.

Time of supply

From a temporal perspective, all turnover for which goods or services were supplied during the assessment period is relevant when calculating the turnover threshold. Whether or not the small business threshold is exceeded therefore depends on the remuneration received by the entrepreneur for the services performed during the assessment period. Therefore, when calculating the small business threshold, the time point when the payment is received is irrelevant. What matters is the services performed in the respective assessment period. Therefore, even under the cash accounting scheme, the basis for calculating the turnover threshold — and thus for determining whether the small business exemption applies — is the time of supply, not the time of payment receipt. Under the cash accounting scheme, companies only have to remit VAT to the tax office once they have received payment from their customers.

Example

U uses the cash accounting system. In 2025, he renders services for which he issues invoices for €40,000. However, he only receives payments totalling €5,000 in 2025. The remaining €35,000 is received in 2026.
For services rendered in 2026, he issues invoices for €50,000, which are paid in full in the same year.

Solution

The small business scheme applies in both years, as services amounting to €40,000 were rendered in 2025, and services amounting to €50,000 were rendered in 2026. The total payments received in 2026, amounting to €85,000, are however irrelevant.

Tip:

It can be a complex matter to continuously check whether the small business threshold has already been exceeded. To avoid tax defaults or even criminal tax offences, you should seek our advice.