You achieve sales tax-free sales within the meaning of § 4 UStG. Therefore, you do not pay sales tax for the goods movement due to lack of tax liability. This is of course at first glance advantageous. Nevertheless, there are cases where standard taxation leads to a lower tax burden. We will explain to you which cases are meant here and when the option for standard taxation according to § 9 UStG can be advantageous for you.

§ 4 UStG exempts certain transactions from VAT liability. Thus, there is no more VAT on these transactions. Section 9 of the UStG provides that for certain of these tax-free transactions to another entrepreneur can be opted for tax liability. The result is that the turnover is charged completely with the turnover tax. In return, however, it is also possible to deduct input VAT on the input transactions which are used to obtain the corresponding taxable transactions. Furthermore, the entrepreneur can limit the option to individual tax-free transactions.

The disadvantages of tax exemption may arise in particular in the exemptions according to § 4 no. 8 lit. a-g, 9 lit. a, 12, 13, 19 yield UStG. Therefore, entrepreneurs who perform such tax-free services to other entrepreneurs for their companies can opt for tax liability according to § 9 UStG.

It should also be noted that according to § 9 II UStG a waiver of the tax exemption of § 4 no. 12 UStG and § 4 no. 9 lit. a UStG is only possible for all real estate transfers if the property itself is not used for transactions that exclude the deduction of input tax. The main application of the restriction of § 9 II UStG lies in the use of land by the tenant or tenant who use the land for the provision of tax-free services. In this case, the option for standard taxation is not possible. The aim is to prevent temporary rentals in order to benefit from an immediate full deduction of VAT on the costs of the building equipment, but if a rental for residential or public purposes is sought.

In addition, there should be a fictitious option for non-taxable foreign sales in the rest of the Union territory, if the country concerned itself knows an option right and if the recipient opted for it.

If a turnover which is taxable per se is covered by one of the exemption provisions of § 4 No. 8-28 UStG, this leads to the fact that, in principle, the deduction of input VAT, insofar as input services have been used to carry out this turnover, is also refused in accordance with § 15 II 1 No. 1 IV UStG. Nevertheless, it can be realistically assumed that the non-deductible input tax is largely passed on covertly to the customer. Since this input tax cannot be disclosed openly, a decreasing trader cannot neutralise the tax passed on to him by deducting input tax. Thus, the customer is taxed even though he is not a consumer. He will therefore in turn include it as a cost factor in his net prices and then again levy sales tax on the hidden sales tax. The economic burden is thus doubled.

The option for standard taxation prevents this. Due to the tax liability of the service, the first entrepreneur can deduct the input tax for his input service and then collect real sales tax on his goods, which the second entrepreneur can then deduct again. Then the sales tax would not have become a cost component at any point in the business chain. This reduces the cost of benefit for the trader entitled to the deduction.

At the same time, avoiding the double burden of VAT means that goods deliveries become cheaper for the end user. The entrepreneurs can therefore offer your goods to the end consumer more cost-effectively. This is particularly desirable if no non-deductible preload has occurred in the case of other powers. In this case, competition may be distorted.

Furthermore, it can also make practical sense to tax the performance. Otherwise, it may be necessary to differentiate on the input side for which output power the precontrol-loaded input power was used. Only with regard to the use for taxable transactions can the trader then make the deduction. Particularly in the case of assets of fixed assets, complicated correction mechanisms are required in the event of a change in use occurring over time (§15a UStG). This can be prevented by opting for standard taxation.

Under these considerations, you need to clarify whether the standard taxation option makes sense for you. If you want to opt for standard taxation, you should explain this to the tax office. You can also do this implicitly by treating the relevant transactions as taxable in the pre-registration or annual declaration. You have to observe formal requirements according to § 9 III UStG only for deliveries of land. You must prove that the entrepreneur to whom you provide the service does not use it for tax-free sales.

It should also be noted that the price agreement in civil law basically includes the tax amount. Therefore, the price agreed for a service is in principle also the expense for the sales tax payable by the contributor. Consequently, the waiver of the exemption does not automatically increase the consideration. Therefore, the consideration for the service provided is now the price minus the sales tax included therein. If, however, the consideration is to have the original value, the civil agreement with the recipient of the service must be amended accordingly:

Original fee = 100 €

Remuneration after waiver without civil agreement (gross = 100€) = 84€ + tax = 16€ (for tax rate of 19%)

Remuneration after waiver with civil agreement (net = 100 € ) = 100 € + tax = 19 €

It may also make sense to set up a sales tax organization. This allows you to avoid the creation of input taxes in the organ circle. You should also include this possibility in your assessment.

You should therefore consider whether the tax exemption of the service makes sense to you or whether you do not gain advantages through the standard taxation option. In the case of the exemptions pursuant to § 4 no. 8 lit. a-g, 9 lit. a, 12, 13, 19 UStG, the option exists. If you take these, you have to check whether you have to recalculate their prices and the contracts have to be redesigned. Otherwise, you might consider establishing a sales tax organization.