Hong Kong's tax system explained: why levies are so low, how it competes  with Singapore, and why it's 'both out of date and ahead of its time' |  South China Morning Post

The small business regulation enables you to be exempt from sales tax. This also applies to you if you work in certain areas such as music, theater and education or do voluntary work. There is also some income that is not covered by the German sales tax law and is therefore not taxable.

Sales tax liability and small business regulation

If you are exempt from VAT, you are not allowed to levy any VAT. If the word VAT and an associated amount appear only once on one of your invoices, the tax office will ask you for a VAT return, if you are subject to sales tax, you must state the statutory sales tax rate and the sales tax amount on every invoice.

Since you can sell certain things to private customers, for example works of art, used company cars or software without an invoice, you have to deduct the VAT from the purchase price for the settlement with the tax office.

  • To do this, divide the final price by 1.19 or 1.07. If you add the VAT rate 19 or 7 percent (as of 2012) to the net price received, you will get the final price again.
  • All sales tax receipts and expenses (input tax) are summarized in the sales tax return for each tax year. The tax office also insists on the regular submission of a VAT return. The information given there is provisional.

Forget the VAT return – respond to the tax office’s request

  • As a newcomer to the self-employed, it can happen that you forget to submit a VAT return. This is usually not a problem unless you refuse to cooperate with the tax office.
  • If important tax documents are missing, the tax office will send you a request for subsequent submission. If you do not react here, you will receive a notification of a tax estimate. That can be a large sum.

If you process your tax return and advance registrations online via (electronic tax return), don’t forget to submit a second signed copy to the tax office once a year. Using the tax app in the right format offers great relief in this case.

Important: If you determine a tax liability in the sales tax return, you have to transfer this to the tax office immediately and without any additional request, contrary to income tax. You have one month to pay after submitting your tax return.

If you are self-employed, you always have to submit your tax return for the previous tax year at the end of May. The annual accounts are well prepared, not a secret science. You will need to fill out some forms using your records. This includes the income tax return and with a few exceptions and also a sales tax return.

Leave a Reply