As a flat-rate entrepreneur, you rarely think about VAT until your business suddenly takes off and invoices start to pile up. Then comes a question that catches many people off guard: when do I have to enter the VAT system and what does that actually mean for my business? In this article we walk through the threshold, voluntary registration, and the obligations that await you once you become a VAT payer.

The threshold of 8,000,000 dinars: how it is actually calculated

The threshold for entering the VAT system is a turnover of 8,000,000 dinars. As soon as you cross it, you lose the right to flat-rate taxation and become a VAT payer. What many people confuse is the way this limit is tracked.

Unlike the flat-rate limit of 6,000,000 dinars, which is calculated per calendar year (1 Jan – 31 Dec), the VAT threshold is viewed as a rolling period of 365 consecutive days. This means that from any given day you can look back 365 days and add up the turnover. That total must never exceed 8 million. The limit, therefore, does not reset with the new year.

Turnover includes the value of issued invoices (not collected payments), with the relevant date being the date of the supply, i.e. the invoice date. Certain services provided to foreign clients (e.g. programming, consulting, and electronically supplied services) are treated separately and do not always count toward this total, so here it is always wise to check the specific case with your accountant.

Voluntary VAT registration: when it makes sense

You don’t have to wait until you cross the threshold. Even if your turnover is below 8 million, you can voluntarily register as a VAT payer. This is not mandatory, but in some situations it can pay off.

Voluntary registration most often makes sense in these cases:

Your clients are mostly VAT payers, so the VAT you charge is not a cost to them (they can deduct it as input tax).
You have significant purchases (equipment, software, services) with input VAT that you could deduct.
You are planning rapid growth and want to avoid an abrupt change of system mid-year.

Important: a flat-rate entrepreneur cannot be in the VAT system and retain flat-rate status at the same time. By entering VAT (whether mandatory or voluntary) you switch to double-entry bookkeeping.

How registration is carried out

The application for VAT registration is submitted on the EPPDV form electronically, via the Tax Administration’s ePorezi portal. In the case of mandatory registration, the application is submitted no later than the deadline for filing the first periodic tax return after the threshold has been exceeded.

From the moment you become a payer, you are required to state and calculate VAT on subsequent invoices. If on the date of registration you have stock of goods, an inventory list of goods is also submitted with the application.

Obligations of a VAT payer

Entering VAT means more serious administration than a flat-rate entrepreneur had. Here are the key obligations:

VAT calculation on turnover at the prescribed rates: the standard rate is 20%, and the special (reduced) rate is 10% for goods and services specified by law.
The PPPDV tax return is filed electronically, within 15 days of the end of the tax period.
The tax period is monthly or quarterly. New payers file monthly in the current and the following calendar year; anyone who achieves turnover over 50,000,000 dinars in the previous 12 months is required to be on a monthly period.
Double-entry bookkeeping and records (the book of received and issued invoices).
Electronic invoicing (SEF) and recording of VAT in the electronic invoicing system within the prescribed deadlines.

In practice this means that from the day of registration you need an orderly bookkeeping process: issuing e-invoices with VAT, recording incoming and outgoing invoices, monthly or quarterly calculation, and timely filing of the return. Mistakes and delays here carry penalties, so it pays to have a system that works from day one.

Key takeaways

The threshold for entering VAT is 8,000,000 dinars, measured over a rolling period of 365 days (not per calendar year).
By crossing the threshold you automatically lose flat-rate status and become a VAT payer.
Voluntary registration is possible even below the threshold; it makes sense when your clients are VAT payers or you have large input VAT.
Registration is carried out using the EPPDV form via the ePorezi portal.
Obligations: VAT calculation (20% / 10%), PPPDV return within 15 days of the end of the tax period, bookkeeping, and e-invoices (SEF).

Note: deadlines and thresholds change from time to time through regulations, and every situation has its own specifics. Before making concrete decisions, check the current data or contact your accountant. If you need help with entering VAT or with assessing whether voluntary registration pays off for you, get in touch.

The threshold of 8,000,000 dinars: how it is actually calculated

Voluntary VAT registration: when it makes sense

How registration is carried out

Obligations of a VAT payer

Key takeaways

Sources