Self-employed in Germany can benefit from the Small Business Regulation (Kleinunternehmerregelung) by saving on time and costs if their income remains below a certain threshold. This guide covers who qualifies as a Kleinunternehmer, the relevant taxes, and the deadlines for running a small business.
Who is a Kleinunternehmer?
The Small Business Regulation (Kleinunternehmerregelung) simplifies the start of self-employment by reducing administrative costs and paperwork, providing a cost-effective advantage, especially if your target customers are private individuals. As a Kleinunternehmer, you are exempt from collecting and paying VAT (Umsatzsteuer) if you meet specific criteria.
Since you don’t charge VAT, you can often offer lower prices than VAT-registered competitors, which can be advantageous for attracting private clients. Companies deduct VAT (Vorsteuer), so are less sensetive to it.
However, to qualify for this regulation, specific requirements must be met. In your first year of business, your revenue should not exceed €22,000, and in subsequent years, it must remain under €50,000.
Revenue is not profit! Revenue is the total of your sales and profit is what is left after business expenses. Kleinunternehmen threshold is revenue-based.
Another benefit for Kleinunternehmer is simplified bookkeeping, which means you don’t need to distinguish between gross and net amounts in your records. This is particularly beneficial in the early stages, allowing you to focus on building your business rather than handling complex tax requirements.
Is Kleinunternehmen tax-free?
Kleinunternehmen status doesn’t mean you’re entirely tax-free. You’ll still need to file an income tax return if your income exceeds the basic allowance of €11,604 in 2024. However, if specific conditions are met, you may be exempt from trade tax (Gewerbesteuer). Here’s a breakdown of the taxes you might encounter and the conditions under which they apply.
VAT Exemptions and Tax Requirements for Kleinunternehmer
As a Kleinunternehmer, you need to consider the following taxes:
Income Tax: Your business profits are subject to income tax. For 2024, the basic allowance is €11,604 for singles and €23,208 for married couples. While income below these amounts is tax-free, you still have to submit an income tax return.
Trade Tax: Trade tax only applies to sole traders (Gewerbetreibende:r), not freelancers (Freiberufler:in) and those in agriculture. The current trade tax exemption threshold is €24,500 annually.
VAT: Kleinunternehmer who opt for the Small Business Regulation are exempt from charging VAT on sales. Still, some self-employed can be asked to file the annual VAT declaration.
When registering as self-employed, you can use Norman’s free tax registration questionnaire to indicate your intent to apply for the Small Business Regulation. Applying for this exemption is straightforward and can be done immediately upon registration.
§19 UStG: Invoicing as a Kleinunternehmer
When invoicing as a Kleinunternehmer, it’s important to omit VAT charges and to indicate the legal basis for this exemption. A simple statement like “In accordance with §19 UStG, VAT is not charged” suffices. All other typical invoice information should also be included to meet legal requirements.
If you use Norman to create invoices, the correct legal wording will be automatically included, ensuring your invoices are always compliant.
Example: Taxation of a Kleinunternehmer
Florian, a 29-year-old hat designer, works full-time in retail for a fashion designer. In his spare time, he creates custom hats, initially for friends and family but eventually for customers as word of mouth grows. He decided to start a small side business and register as a Kleinunternehmer.
Since his annual revenue is around €12,000 in the first year, he doesn’t need to charge VAT under the Small Business Regulation. Additionally, his income from this business falls below the €24,500 trade tax exemption. However, since his total annual income exceeds the income tax allowance of €11,604, he is liable to pay income tax.
Kleinunternehmerregelung 2025: Important Deadlines to Remember
The annual tax return deadline is typically seven months after the end of the tax year. Since 2018, taxpayers have until July 31 of the following year to submit their returns.
With Norman, you can complete your tax returns effortlessly. Try the version specifically for Kleinunternehmer and get started on your income tax return!
Key Takeaways for Kleinunternehmer
Here’s a summary of what to focus on:
Digital recordkeeping: Track income and expenses for accurate reporting.
Revenue monitoring: Ensure you stay within the Kleinunternehmen revenue threshold.
Profit Calculation: Calculate your profit using the cash-basis accounting method and file an income tax return.
Annual VAT Return: Submit this if applicable, even under the Small Business Regulation.
FAQ: Taxes for Kleinunternehmer
How much taxes will I pay as a Kleinunternehmer?
If you qualify under the Small Business Regulation, you don’t need to charge or pay VAT, but you’ll still need to file an income tax return and pay income tax on your profits. The amount of tax depends on your business profits.
What is the tax-free allowance for Kleinunternehmer?
The income tax allowance in 2024 is €11,604. Earnings below this amount are tax-free. Additionally, Kleinunternehmer does not need to charge VAT. This regulation applies to businesses with annual revenue below €22,000 (previous year) and projected revenue not exceeding €50,000 in the current year.
What forms do I need to submit to the tax office as a Kleinunternehmer?
As a Kleinunternehmer, you’ll need to file an annual income tax return, a VAT return if required, and a simple profit-and-loss statement (EÜR). Depending on your self-employment form, you may also need to file a trade tax return. If you have companies as clients in the EU you will also need to file Zusammenfassende Meldung (ZM). All these forms can be done on Norman.
Is VAT Mandatory for Kleinunternehmer?
Kleinunternehmer who opt for the Small Business Regulation are exempt from charging VAT. Provided they remain within the revenue limits, they do not include VAT on their invoices and are not required to remit it to the tax office.