Kleinunternehmerregelung 2026: Germany’s small business scheme – limits, pros and cons, invoices and switching

What is the small business scheme under § 19 UStG?

The small business scheme is a simplification for self-employed people with low turnover. Since 1 January 2025 the sales of small businesses (Kleinunternehmer) have been explicitly VAT-exempt: you do not show VAT on your invoices, do not pay any to the tax office (Finanzamt) and do not file an advance VAT return (Umsatzsteuer-Voranmeldung).

The downside: you may not deduct input VAT. The VAT your suppliers charge you for a laptop, software or office supplies is a cost for you and becomes a business expense at the gross amount in your cash-basis profit statement (Einnahmenüberschussrechnung).

Important: the scheme only concerns VAT. Income tax, the Anlage EÜR and – if you run a trade business – trade tax (Gewerbesteuer) remain completely normal. The rule applies equally to freelancers (Freiberufler) and traders, to full-time and side-business self-employed people, and regardless of your nationality.

Turnover limits 2026: what applies at €25,000 and €100,000?

Since 2025 you check two limits. In the previous year your total turnover must not have exceeded €25,000, and in the current year it must not exceed €100,000. Both values are net amounts – the old calculation “plus the tax on it” has been dropped.

Above all, the hard limit is new: previously a forecast at the beginning of the year was enough, and exceeding it only took effect in the following year. Today small business status ends with the sale that takes you over €100,000. You already write that invoice with 19 % or 7 % VAT; all sales before it remain VAT-exempt.

If in the current year you “only” exceed €25,000, you remain a Kleinunternehmer this year – but from 1 January of the following year you are automatically subject to standard taxation (Regelbesteuerung), because the previous year’s turnover is then too high.

Example: in 2025 you had €23,800 turnover, so in 2026 you are a Kleinunternehmer. By the end of November 2026 you have received €97,000 net, and in December a €5,000 job comes in. This sale takes you to €102,000 – so you already issue the €5,000 invoice with €950 VAT (19 %) and report it in an advance return. In 2027 you are subject to standard taxation in any case.

Kleinunternehmer in the year you start: which limit applies?

If you start your self-employment during the year, there is no previous-year turnover. Then only the actual total turnover of the current year counts, and the limit is €25,000 – not €100,000. Since 2025 there is no longer any extrapolation to twelve months.

Example: you start on 1 May 2026 and have received €24,000 net by October. In November you write an invoice for €3,000. With this sale you exceed €25,000, so you already show VAT on exactly this invoice. From now on you are subject to standard taxation, also in 2027.

You state whether you want to use the small business scheme in the tax registration form (Fragebogen zur steuerlichen Erfassung). There the tax office also asks about your expected turnover – plan realistically, because the decision directly affects your prices and invoices.

What counts towards total turnover – and what does not?

Total turnover (Gesamtumsatz) under § 19 Abs. 2 UStG is the sum of your taxable domestic sales, calculated on the basis of payments received – i.e. the money that has actually come in. An invoice from December that is only paid in January counts towards the new year.

• Included: all fees and sales proceeds in Germany from all your activities together – several trades and a freelance activity are added up, because you only have one business.
• Also included: private use of business items, to the extent it is taxable as a gratuitous supply (unentgeltliche Wertabgabe).
• Not included: sales of fixed assets, such as your old company laptop or the business car.
• Not included: certain VAT-exempt sales under § 4 UStG, for example medical treatment (§ 4 Nr. 14) or teaching services (§ 4 Nr. 21), as well as VAT-exempt financial and insurance sales if they are only ancillary sales.
• Not included: services whose place of supply is abroad, such as consulting for a company in France or the USA – they are not taxable in Germany.

Pros and cons: is the small business scheme worth it?

The answer depends mainly on who your customers are and how much you invest. Private customers cannot deduct input VAT – with standard taxation you would have to charge them 19 % more for the same net revenue. Businesses as customers reclaim the VAT from the tax office anyway; for them it makes no difference.

Worked example with private customers: you offer a workshop for €1,000. As a Kleinunternehmer you keep €1,000. With standard taxation you either have to charge €1,190 or, at the same final price, pay €159.66 VAT, leaving you with only €840.34.

Worked example with an investment: you buy a camera for €2,380 gross. With standard taxation you get €380 input VAT back, as a Kleinunternehmer you do not. With high initial investments and mainly business customers, opting out is therefore often cheaper.

Instead of deciding on gut feeling, check these points. The more of them apply to you, the better the respective option fits:

• In favour of the small business scheme: mainly private customers (courses, coaching, crafts for households, art), low purchases and investments, a side business with modest turnover.
• In favour of standard taxation: mainly business customers who deduct input VAT anyway; high initial investments (vehicle, equipment, furnishings); turnover that will foreseeably grow beyond €25,000.
• Plan for growth: if you are just below the limit, agree prices with customers “plus statutory VAT” now. Otherwise, after switching you have to calculate the VAT out of your previous price and lose around 16 % of your revenue at 19 %.
• Remember the commitment: opting out applies for at least five years. If you only have high investments in one year, calculate whether the input VAT outweighs the later disadvantages with private customers.
• Consider the effort realistically: standard taxation means advance returns, an annual return and a clean separation of net and gross – with accounting software this is very manageable.

Invoices as a Kleinunternehmer: mandatory details and note

Since 2025, small businesses have their own simplified mandatory invoice details under § 34a UStDV: your and your customer’s name and address, your tax number (Steuernummer) or VAT ID (USt-IdNr.), the date of issue, quantity and type of service, the amount and a note on the tax exemption for small businesses. A sequential invoice number and the date of supply are no longer explicitly required, but still make sense for your bookkeeping.

There is no fixed wording. Common are: „Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.“ (No VAT is charged under § 19 UStG.) or „Steuerfreie Leistung als Kleinunternehmer nach § 19 UStG.“ (VAT-exempt supply as a small business under § 19 UStG.) If you accidentally show VAT, you owe it to the tax office under § 14c UStG until you correct the invoice.

On e-invoicing: you have had to be able to receive e-invoices since 1 January 2025. Kleinunternehmer are permanently exempt from sending them; PDF invoices remain allowed. Everything else about layout and mandatory details can be found in the guide writing invoices and on mandatory e-invoicing.

Kleinunternehmer and other countries: reverse charge and the EU small business scheme

A typical trap: if you buy services from foreign businesses – online advertising, software subscriptions, platform fees – you yourself become liable for the tax under § 13b UStG. Even as a Kleinunternehmer you have to pay this VAT to the tax office without being able to deduct it as input VAT. For the months concerned you then exceptionally file an advance return. The details are explained in the guide on the reverse charge procedure.

Since 2025 there is also the EU small business scheme (§ 19a UStG). It lets you use the tax exemption in other EU countries where you make sales – for example as a photographer with on-site jobs in Austria.

• Condition: your EU-wide annual turnover in the previous year and the current year is no more than €100,000, and you meet the national limit of the respective country.
• Apply to the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt); you receive a small business identification number with the suffix “EX”.
• You report your sales in Germany and the other member states to the BZSt every quarter.
• If you exceed €100,000, the EU-wide exemption ends; you must report this to the BZSt.

VAT return and advance returns as a Kleinunternehmer

Kleinunternehmer do not file advance VAT returns. Since the 2024 tax period they generally no longer have to file an annual VAT return (Umsatzsteuer-Jahreserklärung) either. Exceptions:

• The tax office expressly asks you to file one (§ 149 Abs. 1 Satz 2 AO).
• You owe VAT as the recipient of a service (§ 13b UStG), have made intra-Community acquisitions or were involved in an intra-Community triangular transaction (§ 18 Abs. 4a UStG).
• You switched to standard taxation during the year – then you file a full return for that year.
• You still report your income and expenses every year with the Anlage EÜR as part of your income tax return.

Opting out and switching to standard taxation: what happens to input VAT?

You can voluntarily opt out of the small business scheme (§ 19 Abs. 3 UStG). The declaration to the tax office is possible until the last day of February of the year after next and takes effect from the beginning of the year concerned. Opting out binds you for at least five calendar years; after that you can revoke it with effect from a new calendar year.

If you switch to standard taxation – voluntarily or because you exceed the limits – an input VAT adjustment under § 15a UStG may apply in your favour: for assets you bought as a Kleinunternehmer and continue to use, you get a proportional share of the input VAT back. The adjustment period is five years (ten years for buildings). If the input VAT on the purchase is no more than €1,000, there is no adjustment (§ 44 UStDV).

Example: on 2 January 2025, as a Kleinunternehmer, you buy a machine for €10,000 net plus €1,900 VAT. From 1 January 2026 you are subject to standard taxation. Per year, €1,900 ÷ 5 = €380 falls into the adjustment period. For 2026 to 2029 you thus get back 4 × €380 = €1,520 – each time in the annual VAT return, because the annual amount is below €6,000. Conversely, when switching into the small business scheme you have to repay a proportional share of input VAT.

After switching you file advance returns – usually quarterly in the first year. How this works is explained in the guides on the advance VAT return (Umsatzsteuer-Voranmeldung) and on VAT for the self-employed.

The small business scheme and KontoVexa

KontoVexa supports the small business scheme: your invoices contain no VAT and automatically carry the § 19 UStG note, and KontoVexa keeps an eye on your turnover and warns you before you exceed the limits of €25,000 (previous year) or €100,000 (current year). If you become liable for VAT – because you opt out of the scheme or exceed the limits – you switch to standard taxation in the settings: your invoices then show 19 % or 7 % VAT, the input VAT from your expenses is recorded automatically, and KontoVexa prepares the advance VAT return and, on the Business and Pro plans, sends it directly to ELSTER.

Frequently asked questions