If you have a small business with a low revenue, you can be a Kleinunternehmer.
This guide explains who can be a Kleinunternehmer, and when it makes sense to be one.
What is a Kleinunternehmer?
You are a Kleinunternehmer if…1
- last year, you revenue was below 22,000€
- and this year, your expected revenue is below 50,000€
If you are a Kleinunternehmer, you can choose not to charge VAT.
Freelancers (Freiberufler), tradespeople (Gewerbe) and limited liability companies (UG) can be a Kleinunternehmer.2
Should you be a Kleinunternehmer?
It depends. A Kleinunternehmer does not charge VAT. Before you decide, understand how VAT works in Germany.
If you don’t charge VAT, it means:
- Less paperwork
If you don’t charge VAT, you don’t need to submit VAT returns or VAT declarations.8 You save a few hours per month. - Lower prices for your customers
Your prices are lower without VAT. Your private customers pay less, but your income is the same. Your business customers get a refund on the VAT they pay, so they don’t care if you charge VAT. - No VAT refund on business expenses
If you charge VAT, you get a VAT refund on your business expenses.9 For example, if you buy a computer for your business, you get the VAT back. If you don’t charge VAT, you must pay VAT on all expenses. If you have a lot of expenses, it’s better to charge VAT and get VAT refunds.10 - Growing your business is more complicated
If your revenue grows over 22,000€ per year, you must start charging VAT. You must raise your prices to include VAT, change your invoices, and maybe change your accounting tools. If you raise your prices, you can lose customers.11 If you plan to make over 22,000€ per year, it’s easier to charge VAT from the start.13
How Kleinunternehmer revenue is calculated
The Kleinunternehmer status depends on your total self-employed revenue.
Your revenue counts, not just your profit.
Example: You have a 70,000€ revenue. Your business expenses are 50,000€. You make 20,000€ in profit. You are not a Kleinunternehmer, because your revenue is more than the 22,000€ limit.
Only your self-employed revenue counts. Revenue from your job does not count.
Example: You make 40,000€ per year working in a factory. You have a side business that makes 5,000€ per year. You can be a Kleinunternehmer, because your self-employed revenue is less than the 22,000€ limit.
The limit is 22,000€ per year for your total self-employed revenue, not for each business.4
Example: You have two businesses. One business makes 15,000€ per year, and the other makes 20,000€ per year. You can’t be a Kleinunternehmer, because your revenue is more than the 22,000€ limit.
How the revenue limit works
Your revenue must be less than 22,000€ per year.
In your first year in business, the 22,000€ limit is prorated:
Example: If you start your business in July, the limit for that year is 22,000€ × 50% of the year: 11,000€.
Only your VAT-eligible income is measured. VAT-free income does not count.14
Example: Your revenue is 130,000€ per year. 30,000€ is salary from employment (no VAT), 80,000€ is from US clients (no VAT), and 20,000€ from German clients (with VAT). Your VAT-eligible revenue is 20,000€, so you can be a Kleinunternehmer.
If you earn more than the limit
If your revenue is more than 22,000€ this year, you stop being a Kleinunternehmer the next year.3
Example: You make 40,000€ this year, so you are over the 22,000€ limit. In January the next year, you stop being a Kleinunternehmer, and you must charge VAT.
If your revenue is more than 50,000€, you stop being a Kleinunternehmer this year.
Example: You make 70,000€ this year, so you are over the 50,000€ limit. You must start charging VAT.
If your revenue goes back under 22,000€, you can be a Kleinunternehmer again.
Example: You make 40,000€ one year, so you are over the limit. The next year, you make 20,000€. Your revenue is less than the 22,000€ limit again, so you can be a Kleinunternehmer again.
How to be a Kleinunternehmer
Register with the Finanzamt
You decide when you register your business with the Finanzamt.5 If you choose to charge VAT, you must always charge VAT. You can’t change your decision for 5 years.7
How to fill the Fragebogen zur steuerlichen Erfassung
If you don’t charge VAT, you don’t need a VAT number (Umsatzsteuernummer). You should still ask for one when you fill the Fragebogen. 12 If you stop being a Kleinunternehmer, you will already have a VAT number. It makes things easier.
Update your invoices
If you don’t charge VAT, you must add this line to your invoices:6
English: “In accordance to § 19 UStG, no value added tax is charged.”
German: “Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.”
Sources and footnotes
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Sebastian Hoffmann (October 2022) ⤴