Small-Business Scheme (Kleinunternehmerregelung) Changes 2025 – What You Need to Know!

Many freelancers and traders with low turnover value the small-business scheme (Kleinunternehmerregelung) under § 19 UStG: below certain turnover thresholds they do not need to show VAT on their invoices, which minimises administrative burden and offers economic advantages when dealing with end consumers.

From next year, even more business owners will be able to take advantage of this scheme: the relevant turnover threshold is rising from 22,000 to 25,000 euros. Also worth noting is a wide-ranging change affecting the transition from the small-business scheme to standard taxation.

The small-business scheme depends critically on the turnover you achieved in the previous calendar year and are likely to achieve in the current calendar year. To benefit from the scheme, you must not exceed either threshold. The threshold for the current year was based until the end of 2024 on a reasonable estimate; from 2025, actual turnover achieved will be the deciding factor. This can lead to a mid-year switch.

Until now, the threshold for the previous calendar year has been 22,000 euros. From 1 January 2025 it rises to 25,000 euros. As a result, more business owners can potentially benefit from the small-business scheme. At the same time, this increase prevents existing users of the scheme from losing their entitlement. Many businesses are recording higher turnover due to inflation without any meaningful improvement in their economic situation: the rise in the turnover threshold is an important adjustment to price developments.

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The increase is even more pronounced for the current calendar year's turnover: the legislature is doubling the turnover threshold from 50,000 euros to 100,000 euros.

In this regard, a wide-ranging change is taking effect: the obligation to make a reasonable estimate is being abolished, and actual turnover achieved will now be the relevant measure. What does this mean in practice?

Until now, the small-business scheme applies for complete calendar years. This means that if you exceed the 50,000-euro turnover threshold in the current calendar year contrary to your reasonable estimate, nothing changes until the end of the year. The small-business scheme only lapses at the turn of the year.

From 2025, a wide-ranging change applies: as soon as you achieve more than 100,000 euros in turnover in the current year, you must charge and remit VAT. The small-business scheme continues to apply to turnover achieved up to that point — no retrospective adjustment is required. However, standard VAT liability applies to all invoices issued from the moment the threshold is exceeded.

Which revenues count towards the small-business scheme thresholds? Clear rules exist on this point. If in doubt, ask your Guhr Steuerberatung!

The experts will also clarify an important change at the turn of 2024/2025: until now, businesses have been required to add applicable VAT; this obligation is being removed. This is particularly relevant for businesses that have previously been subject to standard taxation and wish to make use of the small-business scheme in future. This change proves advantageous.

Where German small businesses provide services in other EU member states and fall under the national VAT obligation there, they will benefit from a harmonisation measure from 2025: the EU small-business scheme (EU-KU-Regelung) will apply. The key advantage is that you may apply the German scheme to your turnover in other EU member states as well. This reduces your administrative burden.

Several things are changing with the small-business scheme at the start of 2025, but the most important rule remains unchanged: if you are eligible, you may freely decide whether to use the small-business scheme.

This scheme under § 19 UStG has both advantages and disadvantages. The advantages include:

- You avoid administrative burden.

- Transactions with private customers offer economic advantages, as your invoice amounts are lower without VAT.

There is one important disadvantage to set against these: if you use the small-business scheme, you as the business owner must pay VAT yourself. Supplier invoice amounts are correspondingly higher than they would be without § 19 UStG.

What is the better option in your case? This question cannot be answered in general terms — it requires individual consideration. Seek advice from the experts at Guhr Steuerberatung!

What is changing for small businesses in 2025?

Wide-ranging changes to the small-business scheme come into force from 2025. The relevant turnover thresholds for the previous year and the current year are rising to 25,000 euros and 100,000 euros respectively. In addition, the small-business scheme can now lapse mid-year: as soon as businesses achieve more than 100,000 euros in turnover, they must show VAT on their invoices.

What is changing for the self-employed in 2025?

The turn of 2024/2025 brings a wide range of legislative changes. In addition to the amendments to the small-business scheme, the introduction of mandatory e-invoicing deserves attention, for example. There are also various simplifications. Among other things, business owners no longer need to file advance VAT returns if VAT in the previous year totalled no more than 2,000 euros. Until now, this threshold stood at 1,000 euros.