Starting January 1, 2025, notable changes will be implemented for Kleinunternehmer (small businesses) in Germany. The raised sales limit will specifically impact your tax status and obligations. What does this mean for you in practical terms? Below is a summary of the changes designed to help you take advantage of the Kleinunternehmer regulation in 2025.

What is the Kleinunternehmer regulation?

According to Section 19 of the VAT Act, the Kleinunternehmer regulation enables you to declare your sales without VAT as long as you stay within specific sales thresholds. This exemption means you are not required to file an advance VAT return (UStVA). However, a drawback is that you cannot claim input tax deductions. Consequently, unlike businesses that follow standard taxation rules, the tax office will not reimburse you for the VAT paid on purchases or expenses.

Operating as a Kleinunternehmer isn’t a permanent state. Each year, you must evaluate if you still qualify under the criteria. The updated sales thresholds will be crucial, making it beneficial to report on the previous year’s figures in advance.

What will change in the Kleinunternehmer regulation from 2025

New limits

Recently, the sales limit for the Kleinunternehmer was 22,000 € in the previous year and a maximum of 50,000 € in the current calendar year. Thanks to the Annual Tax Act 2024, limits will significantly grow in 2025:

• 25,000 € for the previous year.

• 100,000 € in the current year.

The new revenue limits refer to net amounts. Previously, gross amounts were taken into account. According to the old calculation method, the new limits correspond to 29,750 € in the previous year and 119,000 € in the current year.

The biggest change

Unlike the previous regulation, these limits take effect immediately. Therefore, if your turnover surpasses the limit within the year, you will lose your Kleinunternehmer status and must begin charging sales tax on your invoices from that moment forward.

Reporting

As a Kleinunternehmer, you used to be obligated to file an annual sales tax return every year, even if you did not include sales tax on your invoices or submit advance sales tax returns. However, the Growth Opportunities Act has eliminated this requirement. Your final annual sales tax return will be for 2023. Starting with the 2024 tax year, this requirement is no longer in effect.

⚠️ If you worked with vendors in other EU countries - you still likely need to submit VAT declarations and pay missed VAT due to Reverse Charge. 

An example of the changes

Charleen is a marketing consultant, who registered as a Kleinunternehmer in 2024. Her sales reached 24,000 € in 2024. For 2025, she is planning a turnover of around 72,000 €.  

According to the new regulations, Charleen remains under the limit of 25,000 € for the previous year and 100,000 € for the current year. Therefore, she can continue to be a Kleinunternehmer in 2025 but will lose her status in 2026 if the next tax act doesn’t change the limits again.  

• Charleen attracted more customers than expected through her social media and crossed the 100,000 € limit.  

• In September 2025, her revenue reached 100,000 €.  

• From this moment on, Charleen loses her Kleinunternehmer status and must declare and pay sales tax on all her sales.  

• From now on, she will pay 19% sales tax on her invoices.  

• She is obliged to submit advance VAT returns regularly.

What happens if you cross a border?

If you exceed the new turnover limit of €100,000, you will immediately lose your Kleinunternehmer status and must switch to standard taxation.

• VAT liability: As soon as you exceed the turnover limit, you must show VAT on your invoices and pay it to the tax office. This regulation comes into effect from the time the limit is exceeded.
  Important: The change to standard taxation is binding and applies for at least five years.

• Input tax deduction: You can claim the input tax from your purchases by switching to standard taxation. This can be particularly advantageous if your company has high operating expenses, as the sales tax paid on incoming invoices can be deducted from the sales tax on your invoices.

• Additional reporting obligations: You are obliged to submit advance VAT returns regularly.

Voluntary waiver of the Kleinunternehmer regulation

Although Kleinunternehmer status offers many benefits, there are circumstances where it may be strategically beneficial to opt out of this regulation and choose standard taxation, such as when facing high costs and negative profits. This choice will remain accessible even after the changes in 2025. We have a specialized article detailing how to voluntarily relinquish Kleinunternehmer status and the associated implications. 

When is it worth giving up?

Waiving the Kleinunternehmer status can make sense, especially in the following cases:

• If you mainly serve B2B customers.

• You expect negative profits for quite some time

• Your suppliers are in other EU countries

Want to learn more? We have a dedicated post on this topic as well.

EU-wide application of the small business regulation from 2025

From 2025, the scope of the small business regulation will also be expanded. Until now, the regulation was limited to sales within Germany. With the new regulation, sales in other EU countries can also be included in the sales limits. This means:

• Small business owners from other EU countries who generate the majority of their sales in Germany can use the German small business regulation.

• German small business owners can take advantage of the small business regulations applicable in other EU countries as long as their turnover in these countries remains below 100,000 € per year.

These updates clarify intra-EU trade for small businesses across the EU.

New reporting requirements: What you need to pay attention to

However, the expansion of the regulation also brings new reporting obligations. In the case of cross-border transactions, sales must be documented and reported to the Federal Central Tax Office.

However, this also offers advantages:

• The central reporting of EU sales simplifies the processing of VAT.

• It ensures that you comply with the sales limits in all affected countries.

Overview of changes for Kleinunternehmer from 2025