When do you become liable for VAT (Umsatzsteuerpflicht) in Germany?
Basic rule: Anyone carrying out an economic activity is, in principle, subject to VAT
Any natural or legal person who supplies goods or services in return for payment is considered an “Unternehmer” (entrepreneur) and is therefore, in principle, subject to German VAT (Umsatzsteuer).
Exception: The small business regulation (Kleinunternehmerregelung)
If you meet the following conditions, you are temporarily exempt from charging VAT under the Kleinunternehmerregelung:
| Condition | Maximum limit |
|---|---|
| Your turnover in the previous year | ≤ €22,000 |
| Your (expected) turnover in the current year | ≤ €50,000 |
If both conditions are fulfilled, you may:
not charge VAT (Umsatzsteuer) to your clients,
not deduct input tax (Vorsteuer) from your business purchases,
include a special note on your invoices, for example:
„Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.“
When do you become VAT-liable (umsatzsteuerpflichtig)?
You become liable for VAT in the following cases:
| Situation | Result |
|---|---|
| You exceeded €22,000 turnover in the previous year | You are VAT-liable from 1 January of the following year |
| You expect to exceed €50,000 turnover in the current year | You become VAT-liable immediately in the same year |
| You did not opt for the Kleinunternehmerregelung when registering | You are automatically treated as VAT-liable |
What does it mean to be umsatzsteuerpflichtig?
If you are subject to VAT, you must:
add 19% or 7% VAT (depending on the type of goods or services) to every invoice,
submit VAT returns (Umsatzsteuervoranmeldungen) monthly or quarterly via ELSTER,
pay the difference between VAT collected from customers and input tax (Vorsteuer) paid on your purchases to the tax office.
Example:
A freelance graphic designer earns:
€25,000 in 2024 → still treated as a Kleinunternehmer,
€30,000 in 2025 → becomes VAT-liable from 1 January 2026.
Quick summary:
| Situation | VAT liability (Umsatzsteuerpflicht)? |
|---|---|
| €10,000 turnover in 2024 | No |
| €23,000 turnover in 2024 | Yes, from 1 January 2025 |
| Forecast: €60,000 in 2025 | Yes, immediately in 2025 |
Key terms:
| German term | English meaning |
|---|---|
| Umsatzsteuerpflicht | VAT liability |
| Kleinunternehmerregelung | Small business regulation |
| Vorsteuer | Input tax |
| UStG § 19 | Section 19 of the German VAT Act |
| ELSTER | German online tax portal |
The editorial team has prepared this information with great care and based on several sources. Nevertheless, errors or changes in the law cannot be fully ruled out. This text is therefore intended only as initial, non-binding guidance. For binding and up-to-date advice, please contact your local tax office or a professional tax adviser.
