The Turnover Thresholds That Switch Your Regime — and What Crossing One Costs on the Day

Two clocks, and only one of them is forgiving

A regime threshold answers one of two questions, and the answer decides how much warning you get. Income-tax regimes ask a look-back question: what did you earn last year, or the two years before? If the answer takes you over, your regime changes for the coming year, you have months to prepare, and nothing you invoiced is retrospectively affected. VAT asks a running question: what have you invoiced so far this year? If the answer takes you over, most systems switch you on the spot, and every invoice from that date is a different document from the one you issued the week before.

The practical consequence is that VAT thresholds have to be monitored continuously and income-tax thresholds only have to be checked once a year. Almost everyone does the opposite, watching the big impressive number in the tax regime and losing track of the small one attached to VAT, which in France is less than half the micro ceiling for services and in Germany is a quarter of the current-year limit. The threshold that catches people is never the one they were watching.

What the crossing actually costs, in money

If you sell to businesses, crossing a VAT threshold costs you almost nothing and may even help: your clients reclaim the tax you charge, and you begin reclaiming the tax on your own purchases, which you could not do before. If you sell to consumers, the arithmetic is brutal and immediate. A price of 100 that was yours entirely now contains tax at the standard rate; at 20 % the money you keep falls to 83.33, a cut of 16.67 % in revenue on the same price list. You can raise prices instead, but you are raising them against competitors still under the threshold, which is precisely the distortion these regimes create at their edges.

Leaving a flat-rate income regime costs differently. The flat allowance that stood in for your expenses disappears and is replaced by real accounting, which means keeping and justifying every cost for a year you have already half lived. If your genuine expenses were below the allowance, your taxable profit rises the moment the allowance goes — the regime was subsidising you and the subsidy stops. If they were above it, leaving is a relief. Either way there is a fixed cost in bookkeeping and, usually, in an accountant, and that cost does not scale down for a business that only just crossed the line.

France and Germany: same-day switches, opposite designs

France runs two thresholds at once for the same activity. The ordinary limit for the VAT exemption on services is 37,500 euros of turnover in the previous year; an increased limit of 41,250 euros gives you the current year to notice, and the moment you cross it the exemption ends on that date, not at the year end. For sales of goods the pair is 85,000 and 93,500. The micro-enterprise ceilings are a different, larger pair — 203,100 euros for goods and 83,600 for services in 2026 — revalued on a three-year cycle rather than annually, which is why so much published material still quotes the previous pair.

Germany rewrote its rule for 2025 and the new text is cleaner. Turnover is exempt if the previous calendar year stayed at or below 25,000 euros and the current year does not exceed 100,000. The two numbers do different jobs: the first is the entry test, checked once a year, and the second is a live ceiling that ends the exemption the moment it is passed. The rewrite also changed the legal character of the relief — it is now a genuine exemption rather than a tax that is merely not collected, which matters for invoicing and for the new European scheme that lets a small business apply the exemption in other member states under an identification number carrying an EX suffix.

Spain: the threshold everyone looks for does not exist

There is no Spanish micro-entreprise. A self-employed person in Spain registers, invoices with VAT from the first euro, files quarterly returns and deducts real expenses under the ordinary rules — there is no domestic turnover threshold below which VAT simply does not apply. The European small-business directive that created a cross-border version of these exemptions has been the subject of implementing work in Spain during 2026, including new census and reporting forms for businesses that want to use the exemption in other member states, but that is about operating abroad, not about a home-market franchise. Anyone comparing European regimes and expecting a Spanish counterpart to the French or German scheme is looking for something that is not there.

What Spain does have is a threshold system on the contribution side, and it is the one that costs money on the day it is crossed. Since the 2023 reform, self-employed contributions are set from a table of net-income bands, and each band carries a minimum monthly base you may not go below. In 2026 the general table runs from a minimum base of 950.98 euros for net income of 1,166.70 a month up to 1,928.10 euros for net income above 6,000. Cross that last line and your minimum base rises by 196.07 euros a month, which at the 2026 rates for common contingencies, occupational contingencies and the intergenerational mechanism — 28.30 %, 1.30 % and 0.90 % — is about 60 euros a month, roughly 718 euros a year. The nuance that matters: the band sets a floor, not a fixed amount, so this only bites someone who was contributing at the minimum.

Portugal: two thresholds, both with a twenty-five per cent tolerance

Portugal's VAT exemption sits in article 53 of the VAT code and is low by European standards: 15,000 euros of national turnover in the previous calendar year, for a taxpayer based in Portugal. The article was rewritten by a decree-law of 24 March 2025 to add the European cross-border version, which lets a business established in another member state use the Portuguese exemption if its union-wide turnover stays under 100,000 euros, it has notified its home state, and it holds an identification number with the EX suffix. Being exempt under this article means no deduction of input tax at all — the trade-off is the same everywhere.

The income-tax side is more forgiving than anywhere else on this list. The simplified regime for business and professional income applies while gross income of that category stayed under 200,000 euros in the immediately preceding period, and it stops only when that figure is exceeded in two consecutive periods, or in a single year by more than a quarter — and even then the change takes effect from the following tax period, not immediately. Under the regime, taxable income is a fixed coefficient of gross income: 0.75 for the professional activities in the statutory list, 0.35 for other services, 0.15 for sales of goods and for restaurant and hotel work, with reductions of half and a quarter in the first and second years of activity in several of those categories.

What to do in the month before you cross

Work out which side of the crossing each client sits on. Business clients who reclaim the tax will not notice; consumers will see the price change or you will absorb it. If a meaningful share of your revenue is consumer-facing, model both outcomes before the crossing rather than after, because the decision to raise prices is much easier to explain at a date you announce than at a date the tax office fixes for you. And check whether deferring an invoice into January is legitimate in your case — in most systems the trigger is when the service was supplied, not when the invoice was raised, so this is often not the escape it appears to be.

Then decide whether to cross deliberately. Staying under a threshold on purpose means turning down work, and the arithmetic of doing so is rarely as good as it feels. Losing the exemption on business clients costs nothing; losing a flat expense allowance costs the difference between the allowance and your real expenses, which you can compute exactly; and both are one-off structural changes rather than recurring penalties. Deliberately capping your own turnover to avoid an accounting obligation is a decision that should survive being written down with numbers next to it, and most of the time it does not.

Frequently asked questions

If I cross the VAT threshold in October, do I owe tax on the whole year?

In the systems described here, no — the change applies from the moment of crossing forward, not retrospectively to January. That is the general design, but the detail of which transaction counts as the one that crossed the line, and whether an invoice issued the same week falls before or after, is a question of national rules on when the tax becomes chargeable. If the crossing invoice is large, get the position confirmed in writing before issuing it rather than after, because the difference between the two sides of that date is the whole tax on that invoice.

Can I choose to charge VAT before I have to?

Yes, and for a business selling to other businesses it is often the better choice. Waiving the exemption lets you reclaim the tax on equipment, software, rent and subcontractors, which for anyone with real purchases can be worth more than the administrative saving. The waiver is not free of consequences: German law binds a business that opts out for at least five calendar years, and other systems have their own lock-in periods. Work out your annual input tax first — if it is small, the exemption is worth keeping; if you are about to buy a lot of equipment, it may not be.

Why do the French micro figures I find online disagree with each other?

Because they were correct at different times and the cycle is three years, not one. The micro ceilings are revalued in line with the income tax scale on a triennial basis, so the same pair of numbers is repeated for three years, becomes the standard answer everywhere, and then changes in a single step. For 2026 the correct pair is 203,100 euros for goods and 83,600 for services. A second reason for disagreement is that many pages conflate the micro ceiling with the VAT exemption limit, which is a separate rule with separate figures on a separate revision schedule.

Does the European cross-border scheme replace national thresholds?

No — it sits alongside them. Each member state keeps its own domestic threshold, or chooses to have none, as Spain has. What the European scheme adds is the possibility of using another state's exemption while established at home, subject to an overall union-wide turnover limit of 100,000 euros, prior notification to your own tax administration and an identification number carrying an EX suffix. It is genuinely useful for a small business with customers in several countries, and completely irrelevant to one that sells only at home.

In Spain, does crossing a contribution band cost me immediately?

Not on the day, but it catches up. Contributions during the year are provisional, based on the income band you expect, and are regularised after the tax return against the net income you actually declared. If your final income lands in a higher band than the base you paid on, the difference is claimed; if it lands lower, it can be refunded. So the practical effect of crossing a band is a bill that arrives after the year, which is why the bands should be reviewed when your income changes rather than once at the start. Contributions are also deductible against income tax, so the net cost of a higher band is less than its face value.