Kleinunternehmerregelung is an attractive option for self-employed in Germany, especially freelancers and Gewerbe who are just starting out. Still, there are a few situations where it can make sense to avoid becoming a Kleinunternehmer, even if you are eligible under the revenue thresholds. Here is a quick overview of the main situations where you would prefer to opt out of Kleinunternehmerregelung.
1. Your clients are business
Businesses in Germany charge and deduct VAT. Finanzamt reimburses businesses for VAT on expenses, so all purchases are basically VAT-free for companies.
🧾 This means that your business clients don’t care if there is VAT on the invoice or not.
When your business grows, you will inevitably exit the Kleinunternehmerregelung, so operating as a regular enterprise from the start makes sense.
2. You expect negative profits for quite some time
As mentioned in the previous point, businesses can reimburse the VAT on expenses from Finanzamt—except for Kleinunternehmer. Kleinunternehmer can’t deduct the VAT on costs (as they don’t charge it on revenue) and must bear the total price of the expenses.
If you expect to invest at the start of the business, 19% of the price of equipment, materials, goods, and services can be a significant cost that can be avoided if you don’t become a Kleinunternehmer.
3. Your suppliers are in other EU countries
The EU uses a Reverse Charge procedure, where calculating and paying the VAT is on the buyer, not the seller. This means that you will get invoices without VAT, must submit VAT declarations, and must pay the outstanding VAT to the Finanzamt. We have a dedicated article covering this topic.
💻️️ Paying for Google Ads, Meta Ads, and many other digital products will likely trigger the Reverse charge.
If you have to prepare and submit the VAT declarations, why would you become a Kleinunternehmer?
Conclusion
There are clear benefits to Kleinunternehmerregelung - your clients who are private individuals can pay 19% less without you sacrificing the revenue amount. Still, it’s not a staple solution and should be applied to the situations in which it fits best.
Norman can make tax reporting effortless regardless of whether you are a Kleinunternehmer or not. Become self-employed for free and make entrepreneurship great again with Norman.