Small Business Tax Exemption in the Founding Year
No more pro-rata calculation since 2025 -- Registration, Calculation & Examples
Das Wichtigste in Kürze
- New from 2025: Only actual revenue counts -- no more pro-rata extrapolation to 12 months
- Threshold: Maximum EUR 25,000 in the founding year (even if you start in December)
- Hard cap: EUR 100,000 applies in the founding year too -- takes effect immediately
- Registration: Via the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) at ELSTER
New Rule from 2025: No More Pro-Rata Calculation
One of the most important simplifications introduced by the Jahressteuergesetz 2024 (Annual Tax Act 2024): In the founding year, only the actual revenue matters. The old requirement to extrapolate revenue to a full 12-month period has been completely abolished.
What this means in practice
No matter which month you start your business -- only the revenue you actually earn by December 31st of the founding year counts. If this amount is below EUR 25,000 (net), you remain a Kleinunternehmer in the following year.
Important: The hard EUR 100,000 upper limit also applies in the founding year. If you exceed this amount, the Kleinunternehmerregelung ends immediately -- even for a brand new business.
Old vs. New: Pro-Rata Calculation Compared
The table below shows how the same founding-year scenarios are treated differently under the old rule (until 2024) and the new rule (from 2025). "KU" stands for Kleinunternehmer (small business operator).
| Scenario | Until 2024 (Old Rule) | From 2025 (New Rule) |
|---|---|---|
| Founded July, EUR 15,000 by Dec. | EUR 30,000 (x2) -- No KU next year | EUR 15,000 -- Stays KU |
| Founded October, EUR 20,000 by Dec. | EUR 80,000 (x4) -- No KU next year | EUR 20,000 -- Stays KU |
| Founded March, EUR 24,000 by Dec. | EUR 28,800 (x1.2) -- No KU next year | EUR 24,000 -- Stays KU |
| Founded Jan, EUR 26,000 by Dec. | EUR 26,000 -- No KU next year | EUR 26,000 -- Over EUR 25,000 |
Key takeaway: Under the old rule, founding late in the year almost always led to losing Kleinunternehmer status because the annualization inflated your actual revenue. The new rule since 2025 eliminates this disadvantage entirely.
Registering as a Kleinunternehmer
Registration as a Kleinunternehmer is done through the Fragebogen zur steuerlichen Erfassung (tax registration questionnaire). Here are the five steps:
Register your trade or freelance activity
At the Gewerbeamt (trade office) for businesses, or directly at the Finanzamt (tax office) for freelancers (Freiberufler).
Fill out the Fragebogen zur steuerlichen Erfassung
Available online via ELSTER or as a paper form. Takes approximately 30 minutes to complete.
Select the Kleinunternehmerregelung
In the "Umsatzsteuer" (VAT) section, choose the option "Ich nehme die Kleinunternehmerregelung in Anspruch" (I wish to use the small business exemption).
Provide your estimated revenue
Enter a realistic revenue estimate for the founding year and the following year. Unrealistically low figures may trigger follow-up questions from the Finanzamt.
Receive your Steuernummer (tax number)
The Finanzamt will issue your tax number within 2 to 6 weeks. You need this number on all your invoices.
Tip: If you are unsure whether the Kleinunternehmerregelung is right for you, note that the waiver (Verzicht) can still be declared retroactively until the end of February of the second following year. However, once you waive, you are locked in for 5 years.
Practical Calculation Examples
The following real-world examples illustrate how the new founding-year rule works under different scenarios:
Sarah -- Graphic Designer, founded in September
Revenue Sep--Dec: EUR 12,000. Following year: prior-year revenue = EUR 12,000 (below EUR 25,000).
Sarah remains a Kleinunternehmerin in the following year. Under the old rule, the annualized revenue would have been EUR 36,000 -- exceeding the threshold.
Tom -- IT Consultant, founded in January
Revenue Jan--Dec: EUR 28,000. Following year: prior-year revenue = EUR 28,000 (over EUR 25,000).
Tom must switch to standard taxation (Regelbesteuerung) in the following year. However, he stayed below EUR 100,000 in the founding year, so the exemption applied for the entire first year.
Maria -- Online Shop Owner, founded in March
Revenue through November: EUR 95,000. December orders add EUR 8,000.
Maria exceeds the EUR 100,000 hard cap in December. The invoices that push her past EUR 100,000 must already include VAT (Umsatzsteuer). The exemption ends at the point of exceeding the cap.
Tips for Founders
Be realistic with estimates
Enter realistic revenue figures in the Fragebogen. Estimates that are too low may trigger inquiries from your Finanzamt.
Founding date matters less now
The new rule without pro-rata calculation makes the founding month far less relevant. Start your business when you are ready -- not based on calendar optimization.
Track revenue from day one
Maintain a simple income and expense overview from the start. This simplifies your first Steuererklaerung (tax return) considerably.
Use invoicing software early
Start with software that automatically includes the section 19 UStG notice (Kleinunternehmer-Hinweis) on invoices and tracks your cumulative revenue against the thresholds.
Consider the waiver carefully
If you have B2B clients from the start or plan significant equipment investments, standard taxation (Regelbesteuerung) may be the better choice due to input tax deduction (Vorsteuerabzug).
Häufige Fragen
How is the revenue threshold calculated in the founding year?
Since 2025, only the actual revenue in the founding year counts -- there is no longer a pro-rata extrapolation to 12 months. If you start your business in October and earn EUR 20,000 by December, you remain a Kleinunternehmer (below EUR 25,000). Under the old rule, your annualized revenue would have been EUR 80,000.
What was the old pro-rata calculation rule?
Until 2024, revenue in the founding year was extrapolated to a full 12-month period. Example: founding in July, EUR 15,000 revenue in 6 months resulted in an annualized figure of EUR 30,000. This exceeded the old EUR 22,000 threshold, meaning you lost Kleinunternehmer status for the following year. This rule no longer applies since 2025.
How do I register as a Kleinunternehmer with the tax office (Finanzamt)?
When registering your trade (Gewerbeanmeldung) or freelance activity (Freiberuflichkeit), you fill out the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung). There you indicate that you wish to use the Kleinunternehmerregelung under section 19 UStG. Registration is done via ELSTER or your local Finanzamt.
Does the EUR 100,000 hard cap also apply in the founding year?
Yes, the hard upper limit of EUR 100,000 in the current year also applies in the founding year. If you exceed this amount, the Kleinunternehmerregelung ends immediately -- even if it is your first year of business.
What happens if I exceed EUR 25,000 in the founding year?
Since only actual revenue counts, you lose Kleinunternehmer status only if you exceed EUR 25,000 (or EUR 100,000) in the founding year. In the following year, your founding year revenue becomes the relevant prior-year threshold.
Can I voluntarily opt out of the Kleinunternehmerregelung in the founding year?
Yes, you can waive the Kleinunternehmerregelung in the founding year or afterwards. The waiver declaration (Verzichtserklaerung) can be submitted until the end of February of the second following year and is then binding for 5 years.
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