In day-to-day business, it would be challenging to always prepare a standard invoice containing all of the information required under UStG Section 14 (4) for low-value amounts due to the level of administration involved. This is where small-value invoices come in. Learn what small-value invoices are, when they can be used, and how they differ from standard invoices.
What’s in this article?
- What is a small-value invoice?
- Why do small-value invoices exist?
- When are small-value invoices used?
- What information must a small-value invoice include?
- What needs to be considered with receipts for entertainment expenses?
- When can a small-value invoice not be used?
- What else needs to be considered with small-value invoices?
What is a small-value invoice?
A small-value invoice is an invoice with a maximum value of EUR 250. Compared to standard invoices, they contain less information as their legal requirements are lower. Typical small-value invoices are till receipts, restaurant bills, entertainment expenses, and bar and shop receipts.
How high must the net value of a small-value invoice be?
The upper limit for small-value invoices of EUR 250 applies to the gross value. Businesses need to check this closely when preparing invoices. With a tax rate of 19%, this means the maximum net value is EUR 210.08 and the tax value therefore EUR 39.92. If 7% VAT is applied, then the maximum net value of EUR 233.63 can be invoiced (with a tax value of EUR 16.36).
Why do small-value invoices exist?
Small-value invoices were introduced into law to simplify payment processes. They reduce unnecessary bureaucracy, especially for retail businesses who process high-purchase volumes every day. Preparing a detailed invoice each time would require too much time and effort. The simplification brought about by small-value invoices serves primarily to make things easier for the seller or the invoicing company.
However, the counterparty also benefits. Transactions are simpler and purchases can be completed more quickly. Beneficiaries entitled to deduct input can also calculate the relevant input tax themselves with small-value invoices and include it in their preliminary VAT returns.
The maximum gross amount of the small-value invoice has been adjusted numerous times over the years in line with general inflation. On January 1, 2007, the upper limit was raised from EUR 100 to EUR 150. 10 years later, the current amount of EUR 250 was established.
When are small-value invoices used?
Small-value invoices are primarily used for businesses with frequent low-value payments.
Retail examples:
- Supermarkets
- Drug stores
- Pharmacies
- Hardware stores
- Electronics stores
- Gas stations
- Clothes stores
- Toy stores
- Camera stores
- Florists
Service examples:
- Handicraft businesses
- Taxi firms
- Bakeries
- Hair salons
- Cleaning services
- Copy shops
- Bookstores
Hospitality examples:
- Restaurants
- Bars
- Cafes
- Ice cream parlors
- Takeouts
- Canteens
What information must a small-value invoice include?
There are several legal requirements for invoices. Paragraph 14 (4) of the VAT Act sets out exactly what information is required in an invoice. In addition, the VAT Implementing Regulation (UStDV) stipulates which information is mandatory on a small-value invoice, and which is not. For example, information about the invoice recipient is not required. This is why in retail, till receipts are usually printed without a name or address, saving considerable time and effort. A serial invoice number is also not required.
In line with UStDV section 33, small-value invoices must contain the following mandatory information:
- Name and address of the invoice issuer
- Invoice issue date
- Designation of the product or service
- Product volume or type and scope of service
- Net amount
- Tax rate and amount
- Gross amount
- Potentially a supplementary note on the small business law
Standard invoice
A standard invoice must also contain other information not required on a small-value invoice, including:
- The issuer’s tax number
- The issuer’s VAT identification number
- Name and address of the invoice recipient
- Serial invoice number
- Time and date service was provided
Although not mandatory, the following information is also usually included on a standard invoice:
- Bank details
- Payment deadline
- Contact information
- Potentially a note on the recipient’s record retention obligations
Businesses can issue small-value invoices and standard invoices either themselves or through a certified payment service provider such as Stripe. Payment service providers provide automated invoicing, saving time and minimizing the risk of errors.
What needs to be considered with receipts for entertainment expenses?
Receipts for entertainment expenses under EUR 250—business lunches, for example—constitute small-value invoices. However, receipts need to be issued correctly and in full for the tax office to recognize a meal out as a legitimate business expense. Otherwise, the entertainment expenses cannot be offset, and the input tax won’t be reimbursed. Entertainment expense receipts must contain the following information:
- Name and address of the restaurant
- Date of business meal
- Food and drink (itemized with prices)
- Tax rate and amount
- Names of the individuals present
- Brief description of the occasion
- Gratuity
- Date and time
- Signature
When can a small-value invoice not be used?
Even if the EUR 250 limit is met, it is not always possible to issue a small-value invoice. One exception is cross-border transportation and mail order. For example, when products are sold abroad, section 3 VAT Act (UStG) prohibits the issuing of small-value invoices. This also applies to Intra-Community supply as set out in section 6a UStG and reverse-charge supplies and services in line with section 13b UStG. The latter applies when it is not the company supplying the service that pays the VAT, but the recipient.
The legislature has also prohibited the issuing of multiple small-value invoices for a single service. In other words, dividing an invoice amount over multiple small-value invoices is not allowed. For example, a company cannot issue three invoices each for EUR 100 all relating to a single supply or service. In such cases, the three separate invoices are considered one single invoice and the invoice amounts are consolidated. The overall amount of EUR 300 now exceeds the permitted value of EUR 250, which exceeds the maximum value of a small-value invoice.
What else needs to be considered with small-value invoices?
For products and services under EUR 250, however, small-value invoices can be issued but are not mandatory. Businesses always have the option of issuing standard invoices. Regardless of which option you go with, it is essential that all mandatory information is included.
It is not necessary, and also not advisable, to provide more information on a small-value invoice than is legally required. For instance, leaving the recipient field empty is absolutely fine, whereas entering it incorrectly might prevent the recipient from deducting input tax.
The VAT application regulation makes it mandatory for businesses with electronic till systems or cash registers to issue copies of small-value invoices at all times; this includes till receipts “that can be reproduced from non-editable digital records” (UStAE 14b.1). A standard retention period of 10 years applies to invoices.
Anyone receiving a small-value invoice should check it immediately for completeness and accuracy. As the recipient is not normally named on the document, raising objections at a later date is often not possible. In addition, company audits often lead to increased scrutiny of incoming small-value invoices, particularly those for amounts close to the maximum limit. If invoices are not correct, but have already been submitted to the tax office for VAT purposes, this can quickly become expensive. As a general rule, it is advisable to pay small-value invoices by card rather than cash. This way, it is easy to demonstrate that no tax was deducted at the point of transaction. Anyone handling small-value invoices should ensure their accounting is correctly managed.
In the case of products or services worth over EUR 250, recipients are always legally entitled to a proper invoice. If this entitlement is asserted, then a business cannot simply issue a small-value invoice.