German Small Business VAT Check 2026 (Kleinunternehmerregelung)

The small business rule in section 19 UStG takes small turnovers out of VAT. If you use it, you invoice without VAT and normally file no VAT returns. The price is the missing input tax deduction: the VAT on your laptop, your software and your coworking desk stays with you for good. It is not a form of tax, it is an exemption that hangs on two turnover thresholds.

Since 1 January 2025 those thresholds are EUR 25,000 of total turnover in the previous calendar year and EUR 100,000 in the current one. Both have to hold. Before that they were EUR 22,000 and EUR 50,000, and the second figure was a forecast rather than a fixed limit. That is the real change in the system: an expected estimate became a hard cap measured against actual turnover.

What happens if you cross it? If the EUR 100,000 falls during the year, the exemption ends with the exact transaction that breaks it. That transaction is already taxable; everything invoiced before it stays exempt. Nothing is taxed retroactively, which could genuinely happen under the old forecast rule. In exchange you now have to track your turnover continuously and document the triggering transaction cleanly.

The second trap sits between the two very different numbers. If you turn over EUR 40,000 this year, you remain a Kleinunternehmer for this year, because EUR 40,000 is below EUR 100,000. Next year, though, that same amount is your previous-year turnover, and it is above EUR 25,000. The status then ends on 1 January with no transition period. So if you pass EUR 25,000, prepare the switch to standard VAT while the year is still running.

In your founding year there is no previous year. The EUR 25,000 limit applies to the running year instead, and it applies as a fixed amount: the old practice of extrapolating a part year into a notional annual figure disappeared with the reform. Start a business in October and you still have the full EUR 25,000 available, not a quarter of it.

On invoices: no VAT amount, no VAT rate, but a reference to the exemption, for example tax-exempt turnover of a small business under section 19 UStG. If you show VAT by mistake, you owe that amount to the tax office. On e-invoicing: small businesses do not have to issue electronic invoices themselves, but since 2025 they must be able to receive them. A plain email inbox is enough for that.

You can waive the exemption under section 19 (3) UStG, which then binds you for at least five calendar years. It pays off in two situations above all: when you have large start-up investments whose input tax you could not otherwise reclaim, and when you mostly serve business customers, who do not mind the VAT on your invoice because they deduct it themselves. With private customers the exemption is usually a genuine price advantage. Since 2025 there is also an EU variant: section 19a UStG plus a registration with the Federal Central Tax Office lets you use the exemption for turnover in other member states. For how net, gross and the VAT rate relate to each other in general, use the VAT calculator.