What options do I have with the small business regulation?

Option for the small business regulation

Entrepreneurs with low turnover can opt for the small business regulation under § 19 UStG. This exempts them from VAT liability but excludes the deduction of input tax.

New turnover limits from 2025

From 2025, higher turnover limits apply:

• Previous year: maximum 25.000 Euro (net)
• Current year: maximum 100.000 Euro (net)

New: Net turnover now counts, not gross amounts. Entrepreneurs who remain under 25.000 Euro turnover in 2024 and are expected to be under 100.000 Euro in 2025 can continue to apply the regulation.

Binding turnover limit in the current year

From 2025, the 100.000 Euro limit is an absolute limit: If it is exceeded in the current year, the application of the small business regulation ends immediately. Turnover up to that point remains tax-free. Thereafter, VAT must be shown and paid – unless an exemption applies.

Continuous monitoring of turnover is therefore required.

Start or end of activity during the year

From 2025, the conversion to an annual turnover no longer applies if the activity covers only part of the year. The turnover limit in these cases is 25.000 Euro. If this is exceeded, standard taxation applies from that point.

Invoicing and notes

VAT is not charged when applying the small business regulation from 2025, but turnover is tax-exempt. Therefore, the invoice must contain the following note:

„Exempt from VAT under § 19 UStG.“

Note:

• Do not show VAT on invoices.
• Do not pay VAT.
• No input tax deduction possible.
• Attention: An unjustified VAT statement obliges you to pay the tax to the tax office – the recipient may not claim this as input tax.

Option for standard taxation

You can voluntarily waive the small business regulation. The waiver is binding for five years. This is advantageous if:

• You have high initial investments or material costs.
• You mainly supply to businesses entitled to deduct input tax.

In this case, all VAT amounts must be declared in Form EÜR.

Obligations for small businesses

Small businesses must also include the tax number or VAT identification number and a consecutive invoice number on invoices.

Simplifications from 2024

Since 2024, the obligation to submit an annual VAT return has been waived – unless requested by the tax office. This only applies to entrepreneurs who have not opted for standard taxation.

A waiver of the small business regulation can now also be declared up to two years after the relevant tax year.

Reverse charge procedure (§ 13b UStG)

In certain industries, e.g. construction, the reverse charge procedure applies. The service recipient owes the VAT:

• As a service recipient (e.g. construction services): You must pay the VAT directly to the tax office – even for private construction projects (§ 13b Abs. 5 UStG).
• As a service provider: If you provide construction services, do not charge VAT to the customer (§ 13b Abs. 2 Satz 4 UStG).