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Kleinunternehmer and Kleinunternehmerregelung Explained

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 exceed 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 Sorted.

With Sorted you can fill this form in English (with live helping tips) and for completely free.

Register as a Kleinunternehmer in Germany (in English) here

 

Kleinunternehmerregelung in Germany

 

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 entrepreneurs 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 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 yours 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.“

 

kleinunternehmer in germany

 

 

6) Which taxes 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 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 Sorted. 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 Sorted for as little as 30 EUR!

As a Kleinunternehmer you can use Sorted for 80 EUR per year! (You pay this fee at the time of filing the tax reports.)

 

 

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?

 

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.

6 Comments

  • 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

  • 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.

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