If you are working for yourself, you must report your earnings to Finanzamt (tax office). This is done by submitting the EÜR (Einnahmenüberschussrechnung) as part of your annual tax declaration. EÜR translates to surplus revenue statement or profit and loss statement.

You can submit EÜR for free via ELSTER or use Norman for an easier, faster, and less stressful process.

What is the EÜR?

The EÜR, or profit and loss statement, is a simple way to determine your profits from freelancing. All you need to do is list your income and subtract your business expenses:

Income – expenses = profit

Finanzamt uses EÜR to understand profits or losses from your self-employed activity and calculate income tax. 

Who can use the EÜR?

You must submit yearly tax returns as a freelancer or other self-employed professional in Germany. They include the income tax return, the annual VAT return, and the profit & loss statement (EÜR). 

There are two ways of documenting your profits: The doppelte Buchführung (double-entry bookkeeping) and the much easier Einnahme-Überschuss-Rechnung (EÜR). In general, self-employed freelancers and entrepreneurs who are not required to keep double-entry bookkeeping according to §238 of the Commercial Code can submit an EÜR. If you have a Gewerbe, you can use EÜR if you make less than €600,000 in revenue per year and earn less than €60,000 in annual profit. If that's the case, you're exempt from the more complicated form of double-entry bookkeeping. But as soon as you exceed one of these thresholds, you will be notified by the Finanzamt and have to start doppelte Buchführung by the following financial year.

So-called Handelsgesellschaften, most commonly translated as trading companies or partnerships (like a GmbH or UG), can't choose but must use double-entry accounting to keep track of their finances.

But as soon as you exceed one of these thresholds, you will be notified by the Finanzamt and have to start doppelte Buchführung by the following financial year.

Note that even exceeding just one of these income thresholds will lead to a change of status, so be sure to track your income closely to avoid any surprises. 

What is doppelte Buchführung (double-entry accounting)?

Doppelte Buchführung (double-entry accounting) is a more detailed and complex method of calculating your profits, including active and passive assets.

You are required to keep detailed accounts of your accumulated assets. Depending on your business registration, you might be required to use doppelte Buchführung to keep a detailed record of your business accounts.

What happens if you are a Kleinunternehmen?

Small business owners, or Kleinunternehmen, are not exempt from having to present a detailed calculation of their income and their expenses. 

However, they can choose which method to use to determine their profit. We highly recommend using the much simpler EÜR, though, as it will make your life much easier.

The EÜR only has one thing you need to do differently when you are a Kleinunternehmen: entering your income in a field different from freelancers who have to charge VAT. 

Apart from that, small business owners must fill in the same things as their VAT-paying counterparts. 

What do I need to complete the statement?

To submit your EÜR to the Finanzamt, you can set up an Elster account and complete the document electronically. Alternatively, do it with tax software like Norman. It's in plain English, and you don't need to deal with the complicated government forms. 

In any case, you will need to provide some personal information regarding your self-employed job, e.g., your job description and the legal nature of your business.

The next step is to gather all your relevant business expenses and the income you made in the respective financial year. To get this information right, you need the payment amounts and the date of the payments – the date you received the money in your account. This is generally referred to as the inflow and outflow principle.

How does the inflow and outflow principle work?

When submitting your EÜR, you only have to include income that customers already paid for and transferred into your bank account. This is called the inflow and outflow principle.

It doesn't matter which date you sent out your invoice but which date you had the payment made into your account. The same applies to any business expenses as well: you can ignore the invoice date and only include payments taken from your account before the end of the financial year. 

This resembles the cash and accrual accounting concept or Soll- und Ist-Versteuerung in German. It determines which payments to include for your respective VAT payments: With Sollversteuerung, the VAT is due when you issue an invoice. With Istversteuerung, the VAT is due when the money is received. 

How do I determine my profit?

Your income does not directly equal your profit. Remember that as a freelancer, you will have some business-related expenses that will decrease your profit. So, to determine your actual profit, you will have to subtract all your business expenses from your income. This is the EÜR.

To complete the statement, you first need to know how much you earned in the last financial year. Your business income includes, for example:

• Revenue from sales of goods

• Revenue from services and work performed

• Revenue from the rental of fixed assets

• Revenue from the sale of fixed assets

• Revenue from capital investments

• Commission income

• Settlements and compensation

• Revenue from operating investments

• Revenue from real estate

• Private use of motor vehicles

• Telephone

To calculate your profit, you also need to identify your business expenses. Since not everything can be claimed as a work-related cost, you should first familiarize yourself with business expenses.

Generally speaking, every purchase that you need to make to pursue your work is considered a business expense. Including but not limited to:

• Purchases of goods or services

• Rent for your office or home office

• Repairs

• Ongoing costs

• Rent

• Payroll for employees

• Insurances

• Maintenance

• Business taxes

• Travel expenses

• Advertising costs

• Gifts for clients

• External marketing

• Phone and internet bills

• Services you need to perform your work, e.g., an accountant

• Cost of a bank account

• Further education and training 

• Car-related expenses 

What about VAT?

If you are not a Kleinunternehmer, you must charge VAT on your invoices to your clients. The VAT you charged and paid to the Finanzamt is also relevant to the EÜR. 

For the EÜR, you will have to split your income and include an amount without VAT as well as the sum of the charged VAT. But with Norman, you don't have to worry about that. The app does this for you automatically! If you use Elster for your EÜR, you will have to enter your income without VAT in line 14 and then enter the amount of VAT you charged in line 16. You will have to add the VAT you had to pay for business-related purchases in line 63. If at any point, the Finanzamt paid you any VAT back, you will have to add this amount to line 17.

Determining your profit

Then, you will see an overview of your income minus your expenses to determine your actual profit. You can submit your EÜR directly to your Finanzamt via our Elster interface. 

What are Entnahmen und Einlagen (withdrawals and contributions)?

As the ELSTER form for the EÜR uses a lot of German tax language that is hard to translate, you will most likely stumble upon the words 'Sachentnahmen' and 'Sacheinlagen', which mean withdrawals and contributions. So, what do they mean?

In a financial context, 'Sachentnahmen' and 'Sacheinlagen' are transfers from or additions to your business assets. Your business assets consist of equity, fixed assets, current assets, and liabilities. Your profit also counts toward your business assets but not as 'Sacheinlage'. Examples of 'Sachentnahmen' and 'Sacheinlagen' are cash, services, or assets.

These include:

• Cash withdrawals and deposits

• Goods

• Products

• Services

'Sachentnahmen', meaning withdrawals, are when you withdraw cash, assets, or services from your business assets for personal use. The other way around, 'Sacheinlagen', meaning contributions, is when you transfer cash or assets from your private use into your business assets.

Entnahmen and Einlagen for freelancers

The withdrawal from business assets for livelihood is significant, especially for freelancers. Since freelancers do not pay themselves a salary for their freelance work, they have to compensate for their expenses through private withdrawals from business assets.

Suppose you instead want to invest your personal money or assets into your business. In that case, you can increase the business assets with your contributions. Your total business assets are not taxed; only your profit is. However, ongoing revenues from business assets, such as income from capital investments, must be taxed with business income. In return, you can deduct ongoing expenses from business assets, such as maintenance costs, from business expenses. For these reasons, your withdrawals and contributions throughout the financial year are also queried in the EÜR.

Calculate the EÜR without income

You have to submit an EÜR, even if you don't make any profits as a freelancer or Gewerbe. There is no separate form or declaration for this. As the taxpayer, you don't enter any income in the EÜR in ELSTER. Since the form's fields shouldn't be empty, enter 0 in the corresponding fields.