Small Business VAT Exemption

A company below the statutory revenue threshold may opt out of charging VAT: the Hungarian alanyi adómentesség, the Austrian and German Kleinunternehmerregelung. It invoices without VAT, deducts no input VAT, and normally files no VAT return. AI Finance Team holds this as a setting on the company, and once it is on, VAT coding follows from it.

Setting It Up

The order matters. Each step only makes sense once the one before it is done.

  1. Turn the switch on and save. Open Master data → Companies, pick the company, go to the Tax & VAT tab and tick Small-business exempt under VAT settings. Two date fields appear. Save.
  2. Apply the template. The setup panel appears only after saving. It tells you whether the VAT master data the exemption needs is in place, and Review template opens the list.
  3. Apply it to invoices already in the workspace, if there are any.

Changing the switch and applying the template need the permission "Edit master data". Applying it to existing invoices needs "Edit invoices", which is a different permission. Without "Edit master data" the panel shows nothing at all, not even a warning: silence on this tab does not mean everything is in order. See Roles and Permissions.

The two dates

  • Exempt from: the first VAT date the exemption applies to. It can be left empty, which means "as far back as the records go".
  • Exempt until: the last one. Leave it empty while the exemption is open-ended.

Whether an invoice is treated as exempt is decided per invoice, on its VAT date, against this period. An invoice dated outside it is an ordinary taxable document. If you change a VAT date by hand, the new date decides.

Do not confuse this with the Small-business-exempt supplier partner VAT group. That one describes a supplier who is exempt and is one of the five elements of a VAT code. The switch is about your client's own status.

What the Switch Does

While the exemption is in force on a line's VAT date, the line's Product / Service VAT group becomes Small business exemption (own company), a group that is 100% non-deductible. The group is created for the workspace the first time it is needed. Which VAT code the line gets no longer depends on the partner's group or the calculation method: the line resolves on the Domestic partner group and the Normal method.

On sales lines the rate is set to Small business exemption (AAM) as well, unless the document states another one. An exempt supply or an out-of-scope rate read from the invoice is kept, and so is VAT above zero, which is then flagged.

The result is what a bookkeeper does by hand: purchases are booked gross in the net field with zero VAT, and sales carry the exemption rate with its own return line.

What a line gets, in one table:

The lineWhat happens
A sale with no VAT on the documentThe AAM rate and the AAM sales code
A sale stating exempt supply or out of scopeThat rate is kept, with its own code
A sale with VAT above zeroThe VAT is kept and the line is flagged for you
A domestic purchaseThe single AAM purchase code; the document's rate and VAT amount are kept
A purchase with a foreign supplier or reverse chargeNo code at all: it waits for you (see below)
Any line with a VAT date outside the periodTreated as an ordinary taxable line

The AI never picks this group by itself. It arrives from the switch, or from you.

The Template

The exemption needs a handful of VAT master data rows: the exempt product/service group, the three exemption rate elements, the partner groups and calculation method they sit on, and a short list of VAT codes.

  • Sales: one code per rate. The AAM code is the default for every sale, whoever the customer is. The exempt-supply, out-of-scope, 0% and taxable-rate codes cover an invoice that states one of those.
  • Purchases: a single AAM code. Every domestic purchase resolves to it, keeping the rate and VAT amount the document states.

The list has five parts: partner VAT groups, product/service groups, rates, calculation methods and VAT codes. Expect to see Domestic, Cash-method partner and Small-business-exempt supplier among the partner groups: those are ensured because the workspace needs them, not because the exempt company uses them. No VAT code is built on the last two, since an exempt company cannot also use cash accounting, and that partner group describes suppliers. The app will not stop you setting a cash-method VAT recognition on an exempt company, so do not.

Two rules govern the template:

  • It fills gaps and tidies only its own. Your VAT codes, rates, groups and methods are left alone. One exception: codes an earlier version of the template created and no longer needs are archived once no invoice line uses them (Will be archived). A code still in use stays (In use, kept); run Apply to existing invoices, then apply the template again, and it is archived then. If one of the rows the template needs was archived by someone, applying it brings that row back.
  • It is confirmed, not typed. You review the list and click Apply template.

The template contains no foreign partner groups and no reverse-charge combinations, deliberately. That is what makes the next section work.

The AAM codes carry no return line, because the company files no VAT return for them. The other sales codes copy the return line of the workspace's own domestic code for the same rate. Where the workspace has no such code, the row says return line to fill in, which you do under Master data → VAT codes.

Codes are named in the workspace's language, read when you apply the template: a Hungarian workspace gets for example AAM-KI-27, "Alanyi adómentesség sablon: kimenő, Belföldi, 27%". Codes the template made earlier in another language are renamed, unless someone has edited them.

Lines That Land in Review on Purpose

An exempt taxpayer is still liable, with no right to deduct, for domestic reverse-charge purchases, intra-Community acquisitions and services bought from abroad. The everyday cases are foreign software subscriptions and advertising platforms.

AI Finance Team does not code these automatically. They are rare at exempt clients, and a wrong posting would be worse than a flagged one. A purchase gets no VAT code when the supplier sits in a foreign partner group, when the supplier's country is not the workspace's (even if nobody has classified them yet), or when the line carries reverse charge. A supplier tagged as small-business exempt counts as domestic here, and is coded normally.

Such a line says Exempt taxpayer owes VAT here with no right to deduct, and appears as a to-do on the invoice and in Mission Control. To code one:

  1. On the Lines & VAT tab, change the line's Product / Service group to an ordinary group, for example Services.
  2. Pick or create an ordinary payable VAT code for it, such as domestic 27%.

The line is then marked Manual, keeps your choice through every later re-run, and is booked as an ordinary VAT-bearing line.

These lines are not picked up by Re-run VAT coding. It skips them on purpose, so they wait for you.

A second flag, VAT charged on an exempt company's sale, appears when a sales line carries VAT while the company is exempt. That is usually a setup error, or a threshold breach nobody has recorded. AI Finance Team does not watch the revenue threshold.

What You See on the Invoice

Nothing is rewritten. The line keeps the net, VAT and gross the document states. Where the booked figures differ, they are shown under them in green: for an exempt purchase, the gross as net and zero VAT. If nothing differs, nothing is shown.

A small badge says where a VAT element came from: Exempt company for the switch, Manual for your override, Inferred where the value was derived rather than read.

The same booked figures appear in the Ledger's line columns and in the universal export, in the Booking Net Amount and Booking VAT Amount columns. The exports differ in one detail: Hessyn keeps AAM and exempt supply apart as separate codes, while RLB has a single exempt code and both land in it. What distinguishes them there is the return line.

Invoices Already in the Workspace

Turning the switch on affects what is processed from then on. For what is already there, use Apply to existing invoices on the Tax & VAT tab.

Apply the template first. Re-running before the master data exists leaves sales lines without a rate and spends AI budget on calls that cannot succeed.

  1. Pick the period. These dates choose which invoices are re-resolved, by VAT date. They do not change the exemption period, even though they are pre-filled from it.
  2. Click 1. Preview. Nothing changes yet. You get five numbers: invoices, lines, recoded, left uncoded, and manual lines skipped. Left uncoded is the queue of lines you will code by hand, the ones described above.
  3. Click 2. Apply, which becomes available only after a preview.

A single run covers at most 2000 invoices. A busy year has to be done in several periods.

Leaving the Exemption

Set Exempt until to the last day of the exemption and save. Invoices with a later VAT date are treated as taxable, earlier ones keep their treatment. Then run Apply to existing invoices for the period after that date if any are already loaded.

Do not untick the switch instead. Unticking clears both dates, so the company reads as never having been exempt, and the next re-resolution treats its whole history as taxable.

For a Hungarian workspace with a NAV Online Számla connection, invoices arriving from NAV follow the same rules. Where NAV states the exemption, the line gets the AAM rate element rather than a generic exempt one. Where a rate cannot be established for an exempt company, the line is left without one instead of being booked at 0%, so that it reaches you rather than quietly posting.