Kleinunternehmer and Kleinunternehmerregelung Explained
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Last updated on October 10th, 2024 at 03:02 pm
Who is a Kleinunternehmer in Germany? What is Kleinunternehmerregelung? How does a Kleinunternehmer pays taxes and how do they invoice a client as a small business? Learn more in this post.
The small business rule (Kleinunternehmerregelung) is designed to make life easier for business owners and freelancers in Germany with low annual turnover. If you are registered as a Kleinunternehmer in Germany, you do not need to worry about the intricacies of complicated VAT laws.
1) What exactly is Kleinunternehmerregelung in Germany?
Sole traders or freelancers in Germany are entitled to the small enterprise status (Kleinunternehmerregelung) if their turnover with VAT-liable goods and services:
- did not exceed 22,000 euros in the first year
- is not expected to exceed 50,000 euros in the current year
If you register with the tax office as a Kleinunternehmer in Germany under § 19 UStG, you do not have to show VAT in your invoices.
2) Are these annual limits net or gross turnover?
VAT is due on the turnover, not on the profit.
Turnover or other value figures in the VAT Act are net figures. This also applies to the 22,000 euro and 50,000 euro limits of the Kleinunternehmerregelung.
If your business continues to run well and exceeds this limit you will lose your Kleinunternehmer status and report VAT to Finanzamt as any other self-employed person in Germany.
3) How can you register as a Kleinunternehmer in Germany?
You can register as a small business (Kleinunternehmer) in Germany by filling up the self-employment tax registration form. This is called Fragebogen zur steuerlichen Erfassung.
As of 2021, you can only fill this form online through ELSTER (read the English translation of this form here) or an online tax filing tool such as Accountable.
With Accountable you can fill this form in English and for completely free.
Register as a Kleinunternehmer in Germany (in English) here
4) What is the legal form of a Kleinunternehmer?
As a Kleinunternehmer in Germany, the legal form you choose is not relevant. You can be a sole proprietor or register a corporation and still fall under the Kleinunternehmerregelung. However, most small businesses start with a sole proprietorship or as a freelancer.
The Kleinunternehmer status is not a special legal form and the Kleinunternehmerregelung in Germany applies equally to the following:
- natural persons (Freelancers, Sole traders)
- partnerships (GbR, OHG or KG)
- legal entities (UG, GmbH or AG)
5) How to invoice your client as a Kleinunternehmer?
As stated in § 14 para. 4 UStG, small enterprises are not allowed to charge VAT, but you are obliged to state the reason for not charging VAT.
In addition to the details required on a normal invoice, your invoice has to include the following details:
5.1) Your business details, service, invoice amount and no VAT
Create your invoice as you normally do. If you don’t know what a German invoice looks like then download free templates from here.
However, in a Kleinunternehmer invoice, you don’t need to show your or your clients’ VAT ID or VAT charge.
5.2) A declaration that you’re obliged to Kleinunternehmerregelung
Entrepreneurs registered as Kleinunternehmer must state the reason for the missing VAT information. A reference to the relevant legal paragraph is sufficient. You can use one of the examples in your invoices:
„Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.“
„Gemäß § 19 UStG enthält der Rechnungsbetrag keine Umsatzsteuer.“
„Im ausgewiesenen Rechnungsbetrag ist gemäß § 19 UStG keine Umsatzsteuer enthalten.“
„Als Kleinunternehmer im Sinne von § 19 Abs. 1 UStG wird keine Umsatzsteuer berechnet.“
„Kein Umsatzsteuerausweis aufgrund Anwendung der Kleinunternehmerregelung gemäß § 19 UStG.“
6) Which taxes reports does a Kleinunternehmer file?
Even though a Kleinunternehmer in Germany has limited tax obligations, (s)he still has a couple of tax reports to submit every year.
-
Profit and Loss Statement
- Income Tax Return
6.1) Profit and Loss Statement (Einnahmen-Überschuss-Rechnung/ EÜR)
The profit and loss statement is used to calculate your profit.
First, you will consolidate your income throughout the year in this report. Then you can offset the business income against the business expenses.
Since a Kleinunternehmer in Germany is exempted from VAT, your business expenses should be reported in gross amounts (incl. VAT).
You can also record depreciation (Abschreibungen) on your office supplies or equipment over the years.
Read here what can you deduct as business expenses in Germany.
In the end, you are left with the profits, i.e. what you have earned with your small business after deducting all expenses.
6.2) Income tax return (Einkommenssteuererklärung)
Everyone has to file an income tax return in Germany.
As a Kleinunternehmer in Germany, you are also obliged to file an annual tax return. The profit from your EÜR (= income minus expenses) is taxed by German tax authorities.
The income tax return also includes items such as pension expenses and insurance.
7) How can you file taxes as a Kleinunternehmer in Germany?
As a Kleinunternehmer in Germany, you can easily file taxes online through Accountable. It is an online tax filing tool specially designed for sole traders, freelancers, and Kleinunternehmer in Germany.
In addition to annual tax filing, you can use it for recording your income and tracking your business expenses throughout the year for no extra cost.
If you have some special circumstances such as double taxation, income from abroad or you are married in Germany, you can consult with one of the tax advisors on Accountable for as little as 75 EUR!
As a Kleinunternehmer you can use Accountable for 15,50 EUR per month!
Are you a Kleinunternehmer in Germany or do you want to register as one? Is this post missing some crucial information? Please let us know in the comments below?
Yamini
Hi there, I am the human behind this blog. If you could not tell by my photo, I am fueled by tea. My expat journey started at the age of 19. Germany has been my home for several years. I hope you will find some helpful insights if you are considering moving to Germany or already live here.
16 Comments
Saurav Bansal
Hello Yamini,
If I am registered as Kleinunternehmer, am I still claim VAT return on business invoices I pay including VAT for my business.
Many thanks
Yamini
Hey Saurav,
As a Kleinunternehmer you cannot claim VAT as expense. Kleinunternehmer don’t have a VAT ID, so they aren’t be able to charge or claim VAT by design.
Bogdan
Hello! Could you please clarify, how is the yearly income calculated for the 22k/50k limits? Is it a calendar year or the year starting from your registration date? So, let’s say, if I register in November, should I stay in the 22k limit for November&December only? Or for the 12 months starting from November?
Thanks in advance!
Yamini
Hi, Finanzamt uses the German tax year (a typical financial year) for tax purposes.
Swapnil chandratre
Hello..
Very informative, but I have 1 doubt regarding tax filling, in which Steuer klasse this Kleinunternehmen comes? Is it same as our current tax class or is it separate class? And how much percentage of tax do we approx pay? And is educational consultant falls under this category?
Thanks in advance
Yamini
Hi there, Steuerklasse is generally for salaried people. It depends on your taxable income and family status. % of tax is also calculated from your taxable income.
Self-employed people pay taxes based on their annual reports e.g. profit & loss reports, VAT payments and quarterly taxes that they’ve paid throughout the year. I have detailed articles explaining taxation for self-employed people in Germany if you want to learn more about this.
Vibha
Hi Yamini! Thank you so much – your blog has literally been the Christmas gift I needed this year. Congratulations on such an excellent product! If I am going to work as a freelancer but only for a few weeks and my brutto is expected at 2200 EUR a month, but only for about 10-12 weeks (after which I have to resume my studies, so will be discontinuing the freelancing). I am so confused and concerned about what this means for VAT and whether I will still be a Kleinunternehmen? If you have any tips at all I would be really grateful <3 Thank you!!
Yamini
Hey Vibha, Thank you for the kind words 🙂
So kleinunterhenhmer rule considers your annual revenue. If it is expected to be under 22.000 Euro brutto annually, you can register as kleinunterhenhmer with Finanzamt.
Anita Gutierrez
Hi Yamini,
I will be starting soon as freelancer making brutto a month 2500 EUR (excluding VAT, if applicable).
Would 2700 EUR brutto as income make me elegible for Kleinunternehmerregelung and therefore exempt me from paying VAT?
I am not yet understanding the 22.000 EUR / 50.000 EUR dynamic of the law. Would you be so kind to comment on this please.
Yamini
Hey Anita, According to the figures you’ve shared, your income will exceed the 22k/ annum threshold in your first year. I don’t see how Kleinunternehmerregelung will apply to you. 🙂
Jose
All of this is super useful, Yamini!
I just have a question I find nowhere an answer for:
I have a full-time job, but I also registered as a Kleinunternehmer freelancer and recently got my new tax ID. However, I also requested a VAT-ID and didn´t get it yet.
I have some clients in Spain, which are companies. Can I issue invoices for them without having a VAT-ID, since I´m under the Kleinunternehmerregelung, or do I still need a VAT-ID since I´m invoicing a company in another EU country? I am not sure, and I fear that the Finanzamt may have not given me a VAT-ID because I requested to be Kleinunternehmer, even though I also requested the VAT-ID when I submitted my freelancer registration form.
Thanks a lot for the info!! 🙂
Yamini
Hey Jose, Thank you 🙂
Re. your question – when your client is based in a different EU member state, in your case Spain, the “reverse charge procedure” applies. You must include a reference to the reverse charge procedure on your invoices to your Spanish clients and both your and your client’s VAT IDs.
I suppose you could follow up with Finanzamt about the status of your VAT ID, it can take a couple of months to get it.
Andreia
Hi Yamini
First of all congratulations on the Great blog !
I am digital marketeer looking to set up as a freelancer, however I find all the German information on what professions can be freelancer vs self employed very confusing.
Any idea as to which status a digital marketeer is normally set under?
And if I know I will make more than the threslhold for small businesses do I need to charge VAT from day one?
How does VAT work with other countries? The UK for example? Do I still charge it?
Many thanks
Andreia
Yamini
hey Andreia, thank you 🙂
Freelancing is a type of self-employment in Germany (not two different things). I’ve explained this here: https://madinde.com/are-you-a-freiberufler-freelancer-or-gewerbe
As for VAT and how to charge it to clients from various regions, it’s all covered here: https://madinde.com/how-to-charge-vat-as-a-freelancer-in-germany
I hope this answers all your questions 🙂
Bogdan
Hi, first I would like to congratulate you for this website, the information and how it is presented is a joy to read!
I worked for the last 12 years as a Software Developer and I would like to make the transition to a Freelancer, do you which type of freelancer are Software Developers ?
Do you think that I can apply as a Kleinunternehmen for the first years and then switch to VAT?
Also, it is possible that my first client will be a company for Switzerland, I tried to find some information about the taxation in this case but I am totally confused. (I live in Germany and intend to work remotely for this company in Switzerland).
If you have some idea it would be really useful, I will continue reading all the articles from your website, as I found in them lots of useful information that I can hope will make this transition much more easier.
Yamini
Hey Bogdan, thank you so much 🙂
As for your questions:
Do you think that I can apply as a Kleinunternehmen for the first years and then switch to VAT? – Yes you can.
Regarding taxes – Germany has a tax residence policy. If you live and work in the country for more than 6 months, you become liable to pay taxes to German tax authorities.