Taxes on Small Businesses (Kleinunternehmen) in Germany
(Taxes for “Kleinunternehmer” under § 19 UStG)
A Kleinunternehmer is a self-employed person or small business owner with limited annual turnover, who benefits from simplified tax rules, especially regarding value added tax (Umsatzsteuer / VAT).
This special regime is governed by § 19 of the German VAT Act (UStG).
| Condition | Maximum threshold |
|---|---|
| Turnover (Umsatz) in the previous year | ≤ 22,000 € |
| Expected turnover in the current year | ≤ 50,000 € |
If both conditions are met → you may opt for the Kleinunternehmerregelung and benefit from an exemption from standard VAT obligations.
| Type of tax | Applied? | Notes |
|---|---|---|
| Income tax (Einkommensteuer) | Yes | Levied on net profit (revenues – business expenses) |
| VAT / Umsatzsteuer (MwSt) | No, if you opt for the Kleinunternehmerregelung | You do not add VAT on your invoices and cannot reclaim input VAT (Vorsteuer) on your purchases |
| Corporate tax (Körperschaftsteuer) | Only if you run a corporation (e.g. GmbH, UG) | In that case, the company’s profit is subject to corporate tax |
| Trade tax (Gewerbesteuer) – if Freiberufler | No | Freelancers (e.g. doctors, lawyers, designers) are generally not subject to trade tax |
| Trade tax (Gewerbesteuer) – if Gewerbe (commercial business) | Yes, but with allowance | For sole traders and partnerships, trade tax applies only above a 24,500 € annual profit allowance |
Register your business or freelance activity with the tax office (Finanzamt)
Complete the “Fragebogen zur steuerlichen Erfassung” (tax registration questionnaire)
There you explicitly state that you wish to apply the Kleinunternehmerregelung under § 19 UStG
File an annual income tax return, including:
Anlage EÜR (simple profit and loss statement – Einnahmen-Überschuss-Rechnung)
The main Einkommensteuererklärung (income tax form)
As long as you are within the Kleinunternehmer regime, you generally do not need to file VAT advance returns (Umsatzsteuervoranmeldung) or an annual VAT return (Umsatzsteuererklärung).
Revenues (turnover): 15,000 €
Expenses: 3,000 €
→ Net profit = 12,000 €
→ You pay income tax on this amount according to your personal tax bracket.
Important points:
Your invoices are issued without VAT.
You cannot reclaim input VAT (Vorsteuer) on your business purchases (e.g. equipment, software, office supplies).
Simpler accounting and less administrative burden
No need to charge or remit VAT
Particularly suitable for beginners, side businesses and low-turnover activities
No input VAT deduction: the VAT you pay on purchases remains a real cost to your business
Some business customers prefer invoices with VAT shown, so they can reclaim it as input VAT
If you exceed the turnover limits during the year or in subsequent years, you will automatically switch to the regular VAT regime, becoming fully liable for VAT
| German term | Meaning (Arabic) |
|---|---|
| Kleinunternehmer | مشروع صغير |
| Umsatzsteuer (MwSt) | ضريبة القيمة المضافة |
| Vorsteuer | الضريبة القابلة للاسترداد |
| Einkommensteuer | ضريبة الدخل |
| Gewerbesteuer | ضريبة التجارة |
| EÜR (Einnahmen-Überschuss-Rechnung) | حساب الأرباح والخسائر المبسط |
Small businesses under the Kleinunternehmerregelung are exempt from charging VAT as long as they remain below the legal turnover thresholds.
They mainly pay income tax (and possibly trade tax, if operating as a commercial business with profit above the allowance).
You must register with the Finanzamt and explicitly choose the Kleinunternehmer regime.
Always monitor your annual turnover to avoid accidentally exceeding the limits and falling into the full VAT regime.
The editorial team of the website strives to provide accurate information based on thorough research and multiple sources. Nevertheless, errors may occur or certain details may be incomplete or not fully verified. Please treat the information in this article as an initial reference only and always consult the competent authorities or a professional tax adviser for binding and up-to-date guidance.
