The small business scheme 2026: limits, advantages and drawbacks under § 19 UStG
In short
The small business scheme under § 19 UStG exempts your supplies from VAT if your total turnover did not exceed 25.000 € in the previous calendar year and does not exceed 100.000 € in the current one. Since 1 January 2025 these are net figures, and the supplies are genuinely exempt rather than merely untaxed. You charge no VAT and in return have no input VAT deduction. If the 100.000 € limit is exceeded during the year, the very transaction that breaks it is taxable in full.
As of September 2026. The scheme was fundamentally recast by the Annual Tax Act 2024; the rules described here apply to supplies made from 1 January 2025.
What is the small business scheme?
The Kleinunternehmerregelung is a simplification in German VAT law for businesses with low turnover. Anyone applying it charges customers no VAT, remits none, and in return may not deduct any input VAT.
Since 1 January 2025 the mechanics have changed: under § 19 (1) sentence 1 UStG the supplies of a small business are expressly exempt. Previously the tax arose but was simply not levied. That sounds academic but has practical consequences, for instance for input VAT and for filing duties.
The scheme is an option, not an obligation. Anyone who does not want it can waive it.
Which turnover limits apply in 2026?
Two limits must be met at the same time. Both sit in § 19 (1) sentence 1 UStG:
- Previous year: 25.000 € of total turnover must not have been exceeded.
- Current year: 100.000 € of total turnover must not be exceeded.
More than the figures changed compared with the old law:
| Feature | Until 31.12.2024 | Since 01.01.2025 |
|---|---|---|
| Previous-year limit | 22.000 € (gross) | 25.000 € (net) |
| Current-year limit | 50.000 € | 100.000 € |
| Current-year test | forecast ("expected") | actual turnover |
| Legal effect | tax not levied | supplies are exempt |
Changes to the small business scheme under the Annual Tax Act 2024, as of September 2026.
If total turnover in the previous year exceeds 25.000 €, the scheme does not apply in the following year from the very first euro, even if turnover then falls back below the limit. One euro over is enough.
In the year the business starts, only the 25.000 € limit is relevant, not the 100.000 €. Another change: turnover no longer has to be extrapolated to a full year. If you start in October, the full 25.000 € is available to you. The former extrapolation rule was deleted without replacement.
Are the limits gross or net?
Net. Total turnover is calculated on consideration actually received (§ 19 (2) sentence 1 UStG), and under § 10 (1) sentence 2 UStG the consideration is everything the customer pays less the VAT legally owed on it.
This used to be different: the old version expressly referred to turnover "plus the tax attributable to it". That very addition has been deleted. This is why the old 22.000 € limit was a gross figure and today's 25.000 € is not.
Sales of fixed assets are left out of total turnover (§ 19 (2) sentence 2 UStG). Selling the company car will therefore not push you over the limit.
What happens if I exceed the limit?
This is the sharpest change. If the 100.000 € limit is exceeded during the current year, the exemption ends immediately, and does so already for the transaction that breaks the limit. That transaction is taxable in full, not merely as to the excess.
Example: your total turnover in 2025 was 22.000 €, so the scheme applies in 2026. By September 2026 you have received 80.000 €. In October you invoice a project worth 40.000 € and are paid.
- That payment takes you past the 100.000 €.
- The entire 40.000 € is subject to normal taxation, not just the 20.000 € above the limit.
- From that point you charge VAT, may deduct input VAT and have to file VAT returns.
- The 80.000 € received earlier stays exempt. There is no retroactive taxation of the year's earlier turnover.
That is the big difference from the old law, where the test was a forecast and an unexpected overshoot only took effect the following year. Today actual turnover counts and the effect is immediate.
As soon as you have to charge VAT, work out net, gross and the tax amount with the VAT calculator from Mein MwSt-Rechner and produce the matching invoice with the invoice generator.
Advantages and drawbacks at a glance
| Advantages | Drawbacks |
|---|---|
| No VAT on invoices, so cheaper for private customers | No input VAT deduction on purchases |
| No VAT returns, neither periodic nor annual | Investments and stock become 19 % more expensive |
| Considerably less bookkeeping | No price advantage with B2B customers, who could deduct the VAT anyway |
| Simpler invoices under § 34a UStDV | The status signals a very small business to some customers |
Advantages and drawbacks of the small business scheme, as of September 2026.
The rule of thumb: if you sell mainly to private customers and buy little, you benefit. If you invest heavily or supply mainly businesses entitled to deduct input VAT, normal taxation is often the better deal. The input VAT guide explains how the deduction works.
What does a small business invoice look like?
Since 2025 there is a dedicated provision, § 34a UStDV. It requires less than a normal invoice under § 14 UStG:
- Full name and address of you and your customer
- Your tax number, VAT ID or small-business identification number
- The date of issue
- The quantity and type of goods, or the scope and type of services
- The consideration as a single sum with a note that the small-business exemption applies
- The word "Gutschrift" where the customer issues the invoice
Two reliefs stand out: a sequential invoice number is not required, and no particular wording is prescribed for the exemption note. The tax administration expressly accepts colloquial wording as long as it clearly identifies the exemption. Proven and unambiguous options:
"Gemäß § 19 UStG wird keine Umsatzsteuer berechnet."
"Steuerfrei nach § 19 UStG (Kleinunternehmer)."
Important: if you show VAT by mistake, you owe the amount shown under § 14c (1) UStG even though your supply is exempt. A ready-made template is available under small business invoice.
Can I waive the scheme voluntarily?
Yes. Waiving it under § 19 (3) UStG moves you to normal taxation: you charge VAT and may deduct input VAT. Three points matter:
- Deadline: the declaration to the tax office is possible until the last day of February of the second calendar year following the tax period. For 2025 that means 28 February 2027.
- Irrevocable: the declaration is irrevocable from the outset, unlike under the old law.
- Binding period: the waiver binds you for at least five calendar years (§ 19 (3) sentence 3 UStG), counted from the first year it applies to. After that you can revoke it with effect from the start of a following year.
There is no prescribed form. Anyone who accounts under the general rules in a VAT return is in principle declaring the waiver. Five years is a long commitment, so the decision deserves a proper calculation.
What filing duties do I have?
Far fewer than before. Under § 19 (1) sentence 2 UStG the filing duties of § 18 (1) to (4) UStG do not apply to small businesses. That means neither periodic VAT returns nor an annual VAT return. This relief already applies from tax period 2024.
Two exceptions remain:
- The tax office can require a return in an individual case (§ 149 (1) sentence 2 AO).
- Anyone owing tax under § 13b UStG, on intra-Community acquisitions or under § 25b (2) UStG must file periodic and annual returns for it (§ 18 (4a) UStG).
The second exception catches many in practice: if you buy advertising or software from abroad, you owe the German VAT yourself but cannot deduct it, having no right of deduction. Details in the reverse charge guide. Small businesses are, however, exempt from the EC Sales List (§ 18a (4) UStG).
Small businesses and e-invoicing
There is a clear split here:
- Receiving: mandatory since 1 January 2025. Every domestic business must be able to receive e-invoices, expressly including small businesses. No dedicated inbox is needed, an ordinary email address suffices. A business unable to receive them has no right to demand a paper invoice instead.
- Issuing: not mandatory. Under § 34a sentence 4 UStDV small businesses may always send their invoices as an ordinary invoice, so paper or PDF remain fine. Issuing a genuine e-invoice voluntarily is permitted.
What an e-invoice technically is, and how to read a file you have received, is shown by the e-invoice viewer and the guide on e-invoicing for small businesses.
Kleinunternehmer or Kleingewerbe?
The two terms are often confused but belong to entirely different areas of law:
| Feature | Kleinunternehmer | Kleingewerbe |
|---|---|---|
| Area of law | VAT law | commercial law (HGB) |
| Basis | § 19 UStG | § 1 (2) HGB |
| Criterion | turnover limits of 25.000 € / 100.000 € | whether the business requires a commercially organised operation |
| Consequence | no VAT, no input VAT deduction | not a merchant, no HGB bookkeeping duty |
Comparison of Kleinunternehmer and Kleingewerbe, as of September 2026.
Important: § 1 (2) HGB states no turnover threshold at all; it turns solely on whether the business requires a commercially organised operation. A numerical limit does appear in § 141 (1) AO: a tax bookkeeping duty only arises above 800.000 € of total turnover or more than 80.000 € of annual profit. Both are independent of the small business scheme, and you can be one without being the other.
Sources
- § 19 UStG – taxation of small businesses
- § 19a UStG – special reporting procedure for small businesses in other EU states
- § 10 UStG – taxable amount
- § 14c UStG – incorrect or unauthorised statement of VAT
- § 18 UStG – taxation procedure
- § 18a UStG – EC Sales List
- § 34a UStDV – invoices issued by small businesses
- § 1 HGB – merchant status
- § 141 AO – bookkeeping duty of certain taxpayers
- BMF circular of 18.03.2025 – special scheme for small businesses
Frequently asked questions
What is the small business limit in 2026?
Total turnover must not have exceeded 25.000 € in the previous calendar year and must not exceed 100.000 € in the current one (§ 19 (1) sentence 1 UStG). Both conditions have to be met at the same time. Until the end of 2024 the figures were 22.000 € and 50.000 €.
Are the limits gross or net?
Net. Total turnover is calculated on consideration received (§ 19 (2) sentence 1 UStG), and under § 10 (1) sentence 2 UStG the consideration excludes VAT. The old version expressly referred to turnover plus the tax attributable to it, which is why the former 22.000 € limit was a gross figure.
What happens if I pass 100.000 € mid-year?
The exemption ends immediately. The very transaction that breaks the limit is taxable in full, not merely as to the excess. Turnover received earlier in the same year stays exempt; there is no retroactive taxation of what you already invoiced under the scheme.
What has to appear on a small business invoice?
Under § 34a UStDV: the name and address of both parties, your tax number or VAT ID, the date of issue, the type and quantity of the supply, and the consideration as a single sum with a note on the exemption. A sequential invoice number is not required, and no particular wording is prescribed for the note.
May I show VAT as a small business?
No. If you do show VAT separately, you owe the amount shown under § 14c (1) UStG even though your supply is in fact exempt. Your customer still may not deduct it as input VAT. The only clean route is a corrected invoice showing no VAT at all.
Do I have to file VAT returns?
As a rule no. § 19 (1) sentence 2 UStG exempts small businesses from the filing duties of § 18 (1) to (4) UStG, so neither periodic nor annual returns. Exceptions: the tax office requires one individually, or you owe tax under § 13b UStG or on intra-Community acquisitions (§ 18 (4a) UStG).
How do I switch to normal taxation?
You declare the waiver to the tax office under § 19 (3) UStG. That is possible until the last day of February of the second following year, so for 2025 until 28 February 2027. There is no form; the declaration is irrevocable and binds you for at least five calendar years.
Do small businesses need to handle e-invoices?
Receiving yes, issuing no. Since 1 January 2025 every domestic business must be able to receive e-invoices, small businesses included, and an ordinary email address is enough. For your own invoices § 34a sentence 4 UStDV lets you stay on paper or PDF indefinitely.
