VAT Exemption & Small Business Rule

Besides intra-community supply (category K) and reverse charge (category AE), there are other reasons why a supply may be invoiced without VAT. In the XRechnung standard, these cases are represented using VAT category E (exempt from VAT). For an overview of all VAT categories, see VAT categories in e-invoices (S, Z, K, E, AE).

Difference from zero rate (Category Z)

Category E differs from zero rate (category Z): a supply with category Z is still a taxable transaction that is simply taxed at 0 % (e.g. certain exports). A supply with category E, on the other hand, is exempt from VAT and requires a stated exemption reason. An invoice with category E and no justification text will fail KoSIT validation.

Small business regulation in Germany (§ 19 UStG)

Businesses that apply the small business regulation (Kleinunternehmerregelung) under § 19 UStG do not charge VAT on their invoices. In the e-invoice, this must be represented using VAT category E with a justification text referencing § 19 UStG, e.g.: "No VAT shown, as small business according to § 19 UStG".

Selling with intra-community supply or under the reverse charge procedure requires a VAT identification number. This, however, brings further obligations for small businesses.

Other VAT exemptions under § 4 UStG (Germany)

Other defined VAT exemptions under § 4 UStG are also represented using VAT category E. Typical examples are:

• Educational services (§ 4 No. 21 UStG), e.g. certain teaching and training services
• Medical treatments and healthcare services (§ 4 No. 14 UStG)
• Renting and leasing of real estate (§ 4 No. 12 UStG)

In these cases too, the e-invoice must include a justification text referencing the specific basis for the exemption.

How do I configure this in my e-invoicing solution?

For how to configure VAT exemptions such as the small business regulation or other exemptions under § 4 UStG in your e-invoicing solution, see the documentation of the respective product:

• E-Invoicing for Shopware 6
• E-Invoicing for Shopware 5

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This content is for general information only and is not legal or tax advice. We make no representations or warranties regarding its accuracy, completeness, or currency. Any reliance on this information is at your own risk.