Invoice Without VAT: What You Need to Know!

In this article, you will learn under what conditions businesses may dispense with showing VAT. We also address the question of how to ensure your invoices nonetheless comply with the law. Simply omitting VAT is not enough — you must explicitly state the reason and the legal basis!

In your day-to-day business, you not only issue invoices; you also receive many invoice documents. Invoices without VAT deserve your particular attention — always check their legality. We address this topic as well.

The best-known exception to the VAT obligation is the small-business (Kleinunternehmer) scheme. If your turnover in the current year does not exceed 22,000 euros, or is expected not to exceed 50,000 euros in the following year, you may use this scheme. As a result, you do not charge VAT on your goods and services; conversely, you may not deduct input tax.

The following applies to these invoices from small businesses: the net and gross amounts are identical. You must not, and may not, charge VAT.

In addition, for various business transactions within the EU you may issue invoices without VAT. This applies, for example, to the supply of goods where the purchaser can provide a VAT identification number in another EU member state.

For services in cross-border business within the EU, you are likewise not required to show VAT: the reverse-charge mechanism applies, and the recipient must account for VAT on the supplies in their own country.

The VAT Act (UStG) also provides for exemptions from VAT for certain services.

This applies to, among others, the following areas; details are found in § 4 UStG:

• Education
• Culture
• Medicine and care
• Letting of property

As a freelance teacher, for example, you issue your invoices to adult education centres and similar institutions without VAT.

For small businesses, the state provides a simplified administrative arrangement: if you qualify as a freelancer or trader under the applicable conditions, you may offer goods and services without charging VAT. Accordingly, you do not need to show VAT on your invoices. Important: if you are classified as a small business (Kleinunternehmer), you are also not permitted to charge VAT!

If you use the small-business scheme, you are committed to this option until you exceed the relevant turnover thresholds (annual turnover of 22,000 euros in the current year and 50,000 euros in the following year). You may also voluntarily opt out of the small-business scheme; in that case, you will be required to show VAT on future invoices.

As a small business, you should explicitly note the VAT exemption on your invoices.

A brief sentence is sufficient for this purpose. Examples include:

• "Pursuant to § 19 UStG, the invoice amount does not include VAT."
• "This invoice is issued without showing VAT in accordance with § 19 UStG."

You may also use alternative wording. What matters is the reference to § 19 of the VAT Act (UStG).

In some professions, self-employed individuals find themselves dealing with a mixture of VAT-exempt and VAT-liable supplies. This is the case for doctors, for example. Medical services are not subject to VAT.

Where treatments serve aesthetic purposes or general wellbeing, by contrast, VAT must be charged. Doctors and other self-employed individuals should make this clear on their invoices.

Ideally, as someone affected by this, you should add a legal note on the relevant exemption provision in the VAT Act. The legislature lists the exemptions in the extensive § 4 UStG.

For all invoices, it is advisable to use an invoice template. This makes your work easier and minimises the risk of omitting important information. Alternatively, accounting and invoicing software can be used, which creates invoices largely automatically.

The template should contain all important mandatory details for an invoice document. These include the address of the service provider and the tax number. If you never show VAT as a rule, add the relevant note to your template — referencing the small-business scheme, for example.

Adapt the variable details — such as service descriptions, quantities, and prices — to the subject of each invoice. For mixed invoices containing both VAT-liable and VAT-exempt supplies, list the individual items clearly so that anyone can follow the invoice. State the legal basis of the tax exemption. For transactions with EU partners, you should also make explicit reference to the applicable tax exemption provision.

Your tax advisers in Berlin can give you many valuable tips on VAT. We can show you, for example, how to comply with the complex rules on VAT across the EU. We will also work through with you whether it is worthwhile for you to make use of the small-business scheme.

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