Cash-Basis Income Statement: How to Complete Schedule EUER

It is important that you study the multi-page form carefully and enter your income and expenditure items correctly. Otherwise, inaccurate assessment notices or queries from the tax office may follow. Particular care is advisable when entering your business expenses on Schedule EUER: the tax administration requires a meticulous breakdown of your expenditure into various expense categories.

The cash-basis income statement (EUER) is a simplified method of calculating profit. If you are entitled to determine your profit using Schedule EUER, you belong to a privileged group. Other business owners are subject to a statutory obligation to prepare full accounts, requiring them to record their income and expenditure using the more demanding double-entry bookkeeping system.

For freelancers, the cash-basis income statement always suffices — regardless of your turnover or profit. The position is different if you earn income as a trader. Here, your specific financial figures and your legal form are decisive: if your annual turnover does not exceed 600,000 euros, your profit does not exceed 60,000 euros, and your legal form is that of a sole trader, you are also permitted to submit Schedule EUER.

If you generate turnover as a freelancer or trader, you are required to submit Schedule EUER. There are no exceptions.

Schedule EUER is designed to give the responsible tax office an overview of your business receipts and business expenses. Across four pages (as at 2022), you enter your income and expenditure in the various lines provided — follow the respective instructions strictly.

Schedule EUER consists of the following sections:

• Business receipts (including tax-exempt business receipts)
• Business expenses (including business expenses attributable to tax-exempt business receipts)
• Profit calculation
• Supplementary information (on reserves and hidden reserves)
• Additional information for sole traders (on drawings and contributions)

In the business receipts section, the tax office distinguishes, for example, between VAT-exempt receipts of businesses operating under the small-business (Kleinunternehmer) scheme and receipts that are subject to VAT. Pay close attention to such apparent subtleties throughout Schedule EUER.

The business expenses section of Schedule EUER provides for several dozen lines. The detailed breakdown of expenditure is intended to enable tax officials to assess its tax relevance appropriately.

In the first part of this section you may enter a flat-rate business-cost allowance, provided tax law makes such an allowance available for your profession. In the lines immediately following, you enter, among other things, the costs of purchasing goods and raw materials.

The following areas then follow:

• Depreciation and amortisation: Here you enter depreciation on immovable, movable, and intangible assets. The relevant depreciation rules apply. For larger capital expenditure, you must depreciate the cost over several years. The official depreciation tables (AfA-Tabellen) give precise guidance on the applicable periods.

• Property costs and other expenditure on real estate: In these lines you record, among other things, your rental costs for an office or retail premises. Costs for a home office, however, are entered in a separate section.

• Other fully deductible business expenses: This part of Schedule EUER covers all expenditure that reduces your annual profit in full and immediately. Allocate this expenditure to the designated fields such as telecommunications, costs for legal and tax advice, work equipment including office supplies, and advertising costs.

• Restricted business expenses: For this type of expenditure, various restrictions on tax deductibility apply. These include, among others, entertainment expenses, costs of gifts, and expenditure on a home office.

• Motor-vehicle costs: In this section you enter the expenditure incurred for a motor vehicle.

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Although the cash-basis income statement is a simplified method of profit calculation, it overwhelms many business owners. Depreciation rules, for example, can prove complicated. Can I claim expenditure as a business expense immediately? Or must I depreciate it over several years? For these and other questions, Guhr Steuerberatung is your competent point of contact.

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