(2022) When can I determine the profit using the net income method?

In the cash basis accounting method according to § 4 para. 3 EStG, business income is compared with business expenses, and the result is the profit or loss.  

Traders and farmers can currently determine their profit using cash basis accounting if

• the annual turnover does not exceed 600,000 Euro and
• the annual profit does not exceed 60,000 Euro in the calendar year or financial year.

Freelancers, such as lawyers, notaries, tax consultants, doctors, journalists, artists, etc., and other self-employed individuals can always use cash basis accounting for their profit calculation - regardless of any turnover and profit limit. They are generally not required to keep accounts, but may do so voluntarily.

Merchants as defined in §§ 1 ff. in conjunction with § 238 HGB are always obliged to keep accounts - regardless of any turnover or profit limit. This accounting obligation also applies to tax law (§ 140 AO). The regulation applies to merchants who operate a commercial business, as well as entrepreneurs whose business operations require a commercial organisation due to their nature and scope.