VAT and the Small Business Scheme
The standard VAT scheme
As an entrepreneur, you charge VAT to the customer, whether the customer purchases a service from you or a work of art. You have to pay this VAT to the tax authorities. You yourself pay VAT on products you need to do your work. The VAT you pay yourself is called input tax. Under certain conditions, you can deduct this VAT from the VAT you owe on your turnover. This is the standard VAT arrangement. This regulation does not change anything.
The Small Business Scheme
As of 1 January 2020, a new regulation for small entrepreneurs came into force: a turnover-related turnover tax exemption. With this new KOR, the tax authorities will take your annual turnover as a starting point. If your annual turnover is less than € 20,000 (excluding VAT), you can get a VAT exemption. And that's it.
A VAT exemption means that you no longer have to write out VAT invoices and no longer have to submit a VAT return, so you no longer have to charge VAT on your sales. Of course, it also means that you can no longer reclaim VAT. Another point to take into account is the rent of your studio. Those rent costs can be more expensive without VAT, up to a maximum of 21%. SKAR can no longer reclaim the VAT on, for example, the maintenance of such an exempt studio. SKAR works on a cost-price basis and is happy to apply the SKAR standard, but unfortunately, the extra costs involved in an exempt studio must be passed on.
The new Small Entrepreneurship Scheme is not compulsory and will not always be beneficial or unfavourable for everyone, even if your turnover is less than € 20,000. Whether or not you want to participate depends on your personal situation and you have to find out for yourself, for example on the site of the tax authorities: