You have got an idea, a bit of courage and finally want to get going, but the mere thought of VAT, monthly returns and forms already kills the mood? This is exactly where the German small business scheme, the Kleinunternehmerregelung under Section 19 of the VAT Act (§ 19 UStG), comes in. Think of it as the beginner mode of German tax law: anyone who starts with a small turnover saves themselves most of the effort and shows no VAT on their invoices. It sounds almost too good, but it comes with a few clear rules you should know.
At the start of 2025 the scheme was thoroughly overhauled. The limits went up, they have been calculated net ever since, and on top of that there is now, for the first time, a Europe-wide version for everyone who sells across the border. In this guide we go through it step by step: what has changed, when the scheme applies to you, how you write a clean invoice and when it can even pay to waive it. By the end you will know exactly whether the Kleinunternehmerregelung fits your plans.
The key points at a glance:
- With the Kleinunternehmerregelung under § 19 UStG you show no VAT on your invoices and pass none on to the tax office.
- Since the 2025 reform, two net limits apply: up to €25,000 turnover in the previous year and up to €100,000 in the current year.
- Break the €100,000 mid-year and the exemption is over at once, not at the turn of the year.
- The scheme is a pure tax status. Trade or freelance, full-time or on the side: only your turnover counts.
- In return you do not get back the input VAT on your purchases, which service providers barely notice but purchase-heavy businesses certainly do.
- New since 2025: the EU small business scheme keeps you VAT-exempt on sales into other EU countries too.
What is the Kleinunternehmerregelung under § 19 UStG?
Picture VAT as a kind of pass-through item: normally you add it to your prices, collect it from your customers and hand it on to the tax office. As a Kleinunternehmer you get to skip that whole middle step. So what does the Kleinunternehmerregelung actually mean? It is a simplification, set out in Section 19 of the VAT Act (Umsatzsteuergesetz), with which you charge no VAT and, in return, carry a good chunk less bureaucracy. The state wants to relieve small businesses this way, and that is a real advantage when you are just starting out.
One point causes confusion almost every time, so here it is upfront: the scheme is tied neither to a legal form nor to a registered small trade (Kleingewerbe). What counts is solely how much turnover you make. That is why the freelance designer can use it just as much as the tradesperson with a trade licence, and whether you run the whole thing full-time or only in the evenings after your main job changes nothing about the classification. At its core, then, Kleinunternehmer is not a title and not a company, but simply a decision you make at the start on a single question.
Turnover limits 2026: when does the Kleinunternehmerregelung apply?
Now to the numbers, because everything is decided by them. Since the 2025 reform, two turnover limits apply, and both count net, so without VAT. Your turnover in the previous year must not exceed €25,000, and in the current year the limit sits at €100,000. For comparison: before the reform it was over at €22,000 gross in the previous year, so the small business turnover limit has moved noticeably upwards and gives many founders room to grow. A short example makes it tangible: if you earned €18,000 last year, you are clearly below the limit and may carry on with the scheme, no ifs or buts.
And what if you only get started mid-year? You used to have to project your turnover to the full year, which caused plenty of head-scratching in that first year in particular. That projection has been scrapped entirely with the reform, so in the founding year the €25,000 limit is simply what counts. The table below sums up the small business limit:
| Period | Limit (net) | What applies |
|---|---|---|
| Previous year | €25,000 | Stay below it and you may use the scheme |
| Current year | €100,000 | Exceeding it ends the exemption immediately |
| Founding year | €25,000 | No more projection to the full year |
That leaves the question of what happens when your business really takes off and you crack the €100,000. Here the reform is strict: the exemption ends the moment you exceed the limit, not at the convenient turn of the year. Only the part above the limit then becomes VAT-liable, everything before it stays exempt. When exactly you become liable for VAT is therefore decided almost to the cent. My advice: keep an eye on your figures and let the tax office know as soon as the switch is on the horizon, and you will spare yourself a nasty surprise.
Let us clear up one mix-up right away, because it happens so often: how much can you actually earn as a Kleinunternehmer, or put differently, how much turnover is allowed for a small trade? The important thing is that for the limit it is always the turnover that counts, not the profit. So it is about what comes in, not about what is left after your costs. The maximum turnover is €100,000 in the current year, and the same holds for a side business (Nebengewerbe): anyone founding on the side stays VAT-exempt under the scheme, as long as they remain below this earnings limit.
Advantages and disadvantages of the Kleinunternehmerregelung
To be honest, the scheme is not a sure thing in every case, but for most people at the start it is clearly a win. The biggest plus is simplicity. The tiresome monthly VAT return (Umsatzsteuervoranmeldung) falls away entirely, your invoices stay pleasantly short, and the whole bookkeeping shrinks down to a minimum. On top comes a nice price advantage towards private customers: because no 19% VAT is added to your final price, you simply look cheaper than the competition. For a micro business with lots of private customers, that is often the decisive head start.
The other side belongs on the table just as much, though. Because you show no VAT, you get no input VAT back in return, and that can add up. Do the maths once: if you buy equipment for €5,000 plus €950 VAT, those €950 stay with you, whereas under standard taxation you would have got them back from the tax office. Anyone who buys in a lot feels that clearly. And in dealings with business customers, the small note on § 19 UStG reveals in passing that your turnover is still modest, which makes some clients hesitate. Here is the balance in short form:
| Advantages | Disadvantages |
|---|---|
| No VAT on invoices | No input VAT deduction on purchases |
| No monthly VAT return | Less attractive when dealing with business customers |
| Lower prices for private customers | Turnover stays tied to the limits |
| Much less bookkeeping | Switching to standard taxation binds you for five years |
Who is the Kleinunternehmerregelung worth it for?
The right answer hangs on two questions: who do you serve, and how much do you spend yourself? The scheme is ideal if you start out self-employed on the side as a Kleinunternehmer, have hardly any expenses and earn your money mainly from private customers. A coach, a tutor or a photographer, in short the classic freelancer using the scheme, usually does splendidly with it, because big purchases rarely come up for them. And in that early startup phase, when turnover is still tender, the scheme takes a good deal of admin off your plate too.
In two situations, though, you should look more closely. If you buy in expensively, say machines, stock or high-end equipment, the missing input VAT deduction really hurts, and standard taxation tends to work out better in the end. It looks similar when your clientele consists almost entirely of companies: for them VAT plays no role, since they deduct it as input VAT anyway, so your price advantage fizzles out while you give up your own input VAT deduction at the same time. In both cases it pays to run through both scenarios calmly before you commit.
Applying for the Kleinunternehmerregelung and invoicing
You need not dread the bureaucracy, by the way, because the route is shorter than most people fear. You register your activity, tick a single box at the tax office and may then get going. These four steps take you from registration to your first correct invoice:
Becoming a Kleinunternehmer in 4 steps
If you are trading, you register your business with the trade office (Gewerbeamt), which usually costs you between €20 and €60. As a freelancer you save yourself that trip and turn straight to the tax office. This one classification decides which authority is responsible for you from now on.
Shortly after registering, the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) lands with you, and you submit it conveniently online via ELSTER. This is exactly where you estimate your turnover and, with a tick, actively choose the Kleinunternehmerregelung under § 19 UStG.
A few days later your tax number drops into your letterbox, and from that moment you may officially write invoices. Only with it are you recorded in the tax office system and ready to go for your first job.
Separate business and private payments from day one, ideally, because it spares you hours of sorting later. With a business account for small businesses you set money aside for tax via sub-accounts and see every transaction straight away in real time.
Mandatory details on Kleinunternehmer invoices
Even without VAT, the usual mandatory details apply when writing an invoice, only the tax line falls away. In its place you add a short, unambiguous note on the exemption. The tried-and-tested wording is: "Gemäß § 19 UStG wird keine Umsatzsteuer berechnet" (no VAT is charged under § 19 UStG). Forget this sentence and you quickly run into queries you could easily have spared yourself. A correct Kleinunternehmer invoice contains:
Waiving the scheme and standard taxation
Sometimes, surprisingly, the exemption is the worse choice, and you want to switch voluntarily to standard taxation (Regelbesteuerung). The reason is almost always the same: the input VAT deduction. Anyone who buys in a lot or mainly serves business customers reclaims the input VAT under normal taxation and often comes across a shade more professional to firms. Waiving the Kleinunternehmerregelung is about as uncomplicated as it gets: you tick the relevant box in the questionnaire or submit a short, informal declaration to the tax office.
Two deadlines are worth remembering, though, otherwise a free decision quickly turns into a trap. The waiver binds you for five calendar years, and the reform has changed nothing there. What is new since 2025 is that you can declare it retroactively, namely until the end of February of the second year following the turnover year. The biggest stumbling block waits at the end of the five years: the waiver does not lapse on its own but keeps applying until you actively revoke it. So if you want to return to the Kleinunternehmerregelung, you have to take that revocation (Widerruf) into your own hands.
In short: Waiving the Kleinunternehmerregelung binds you for five years. Since 2025 you can declare it retroactively until the end of February of the second following year, and it only ends with your active revocation (Widerruf).
Bookkeeping and tax return for small traders
At the word bookkeeping most small traders (Kleingewerbetreibende) breathe a sigh of relief first, and rightly so. You need neither double-entry bookkeeping nor an elaborate balance sheet, the simple cash-basis statement (Einnahmenüberschussrechnung, EÜR), in which you set your income against your expenses, is enough. You do not get away from the tax office entirely, though: an annual tax return stays mandatory, although for the VAT declaration as a Kleinunternehmer an entry in the income tax return has usually been enough since 2025. You tax your profit via income tax, as soon as it is above the basic allowance, and you keep your receipts for ten years.
Trade tax and special cases
One misconception is stubborn, so here is the clarification: the Kleinunternehmerregelung concerns VAT only and leaves trade tax (Gewerbesteuer) completely untouched. If you run a business, trade tax can therefore well arise, quite independently of your VAT status. The good news follows at once, however: for sole proprietorships and partnerships a small business allowance of €24,500 a year applies, and only above that mark does any trade tax fall due at all. With their profit, many Kleinunternehmer stay below it anyway and end up paying none.
That leaves the special cases, which love to raise question marks in everyday life. If you carry out several activities in parallel, all turnover is counted together for the limit, because the small business limit sticks to you as a person and not to the individual venture. In a civil-law partnership (Gesellschaft bürgerlichen Rechts, GbR), in turn, the limit applies to the partnership as a whole, not to each partner separately. And anyone running a photovoltaic system combines it with the scheme especially often. It only gets tricky once you sell into other EU countries, and it is precisely for that that there has been a dedicated solution since 2025.
The new EU small business scheme since 2025
Your exemption used to end at the German border: as soon as you sold into another EU country, you usually became liable for VAT there, with everything that goes with it in foreign forms and deadlines. Since 2025 there has finally been a clean solution for this, the EU small business scheme under § 19a UStG. With it you take your exemption across the border, so to speak. Two levels mesh together here: in each country its own local turnover limit counts, and on top your total turnover across the EU single market must not exceed €100,000 a year.
How do you get the EU scheme? Your point of contact is the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt). You register there electronically in advance and receive your own small business identification number, which ends in "-EX". After that you report your turnover to the BZSt every quarter via a special procedure, rather like a small collective return. The ones who benefit most are e-commerce sellers and everyone who regularly sells services into other EU countries. Burst the €100,000 across the EU and you have 15 working days to report it to the BZSt, so it is better to check the figures once too often than once too little.
In short: Since 2025 the exemption also applies across borders. You register with the Federal Central Tax Office (BZSt), receive a small business ID ending in "-EX", report quarterly, and may turn over at most €100,000 across the EU.
Avoiding common mistakes
Most slip-ups happen not out of carelessness but simply because the knowledge is missing, and once you know them, you steer around them almost by yourself. The classic: anyone who mixes up gross and net misjudges the limits and slides unintentionally into VAT liability. These stumbling blocks come up especially often:
All in all, the Kleinunternehmerregelung is one of the friendliest ways into self-employment that German tax law has to offer. You choose the status with the tax office, save yourself the VAT and start with a minimum of paperwork. Keep an eye on your turnover limits, set a little aside for tax from every job and separate your finances cleanly, and the effort stays pleasantly small. A fitting Vivid business account takes a lot of the routine off your hands, and for ongoing bookkeeping you have all your figures in one place.
A business account for Kleinunternehmer
Separate private and business finances from the start. With the Vivid business account you build tax reserves in sub-accounts, write invoices and keep every transaction in view in real time.
Frequently asked questions (FAQ)
Can I apply for the Kleinunternehmerregelung retroactively?
The neatest way is to choose the scheme straight away at founding, in the tax registration questionnaire. If you missed that, a switch is usually only possible from the start of the next calendar year, whereas a genuine retroactive change for a year already gone is hardly on the cards. So turn to your tax office early, as soon as you notice the entry is missing.
What happens if I estimate the two turnover limits differently?
At the start of the year you estimate your turnover, and that is entirely normal. What counts in the end is the previous-year figure: if it was below €25,000, you count as a Kleinunternehmer in the new year, even if your forecast was off. Only when you actually break the €100,000 during the year does the exemption end immediately.
Do I still have to file a tax return as a Kleinunternehmer?
Yes, there is no getting around it. The exemption concerns VAT only, your other obligations remain. You still file an annual income tax return and attach your cash-basis statement (EÜR), quite independently of the ongoing bookkeeping.
Can I issue invoices with a discount as a Kleinunternehmer?
Of course, you grant discounts and early-payment terms as normal. Because you show no VAT, only its breakdown falls away: you deduct the discount straight from the net amount and state the final price. The note on § 19 UStG still belongs on every invoice.
What happens if I accidentally showed VAT?
Then it gets briefly awkward, but it is fixable: if you show VAT although you are exempt, you actually owe that amount to the tax office. The way back runs via a correction invoice, so you cancel the incorrect invoice and issue a new one. Be sure to inform your customer, because they may not deduct the wrongly paid tax as input VAT.
Does the Kleinunternehmerregelung apply automatically to my Kleingewerbe?
No, and here a close look pays off. A "Kleingewerbe" is not a legal form of its own but merely describes a small trade without an entry in the commercial register. The Kleinunternehmerregelung, by contrast, is a tax status you actively choose. So you can run a Kleingewerbe without using the scheme, and conversely it is open to freelancers with no trade at all.
How does the EU small business scheme affect my bookkeeping?
It does bring a little more care with it. You track your turnover separately by country, because in each country the local limit counts and on top the €100,000 applies across the EU. Add to that the quarterly report to the Federal Central Tax Office (BZSt). A cleanly kept business account, on which you have every transaction in view, makes this split noticeably easier for you.
Note: The content of this blog is for general information only and does not constitute legal, financial, investment or tax advice. It is not a recommendation or a basis for financial decisions. All information refers to the status as of July 2026 and may change. Before acting on the basis of this information, please seek advice from qualified professionals who take your personal situation into account.
