Small Business Regulation 2025: Everything About § 19 UStG

The small business regulation (Kleinunternehmerregelung) under § 19 UStG is one of the most important tax reliefs for founders, freelancers, and part-time self-employed individuals in Germany. It exempts you from VAT - with all its advantages and disadvantages. In this guide, you'll learn everything you need to know for 2025.

Key Takeaways

• Revenue limit 2025: €22,000 in the previous year + expected €50,000 in the current year
• Advantage: No VAT on your invoices
• Disadvantage: No input tax deduction on purchases
• Required note: "No VAT charged due to the application of the small business regulation according to § 19 UStG"

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What Is the Small Business Regulation?

The small business regulation (§ 19 UStG) exempts small businesses from VAT. This means:

What you DON'T have to do:

• Show VAT on invoices
• Submit VAT advance returns
• Create annual VAT declarations (simplified)

What you still have to do:

• Apply for a tax number
• Submit income tax returns
• Include the required note on invoices

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The 2025 Revenue Limits in Detail

To use the small business regulation, you must stay within two limits:

Important: Gross = Net for Small Businesses

Since you don't charge VAT, your gross revenue equals your net revenue.

Example 1: New Business in 2025

You start in March 2025 and expect €30,000 revenue by December.

Calculation:

• 10 months of activity
• €30,000 ÷ 10 × 12 = €36,000 annualized
• → Small business regulation possible (under €50,000)

Example 2: Existing Business

You had €20,000 revenue in 2024 and expect about €45,000 in 2025.

Check:

• Previous year (2024): €20,000 ✅ (under €22,000)
• Current year (2025): €45,000 ✅ (under €50,000)
• → Small business regulation still possible

Example 3: Exceeding the Limit

You had €25,000 revenue in 2024.

Check:

• Previous year (2024): €25,000 ❌ (over €22,000)
• → From 2025 standard taxation (VAT obligation)

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Small Business vs. Standard Taxation: Comparison

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When Does the Small Business Regulation Pay Off?

✅ Small business regulation recommended:

1. Private customers (B2C): Your customers can't deduct input tax anyway
2. Low investments: You buy few goods/services with VAT
3. Side business: Minimal administrative effort desired
4. Service providers: Little input tax from purchases

❌ Standard taxation recommended:

1. Business customers (B2B): Your customers expect net prices
2. High investments: You buy a lot with 19% VAT (e.g., technology)
3. Fast growth: You'll soon exceed the limits
4. Trade: High goods purchases with input tax

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Calculation Example: Small Business vs. Standard Taxation

Scenario: IT Freelancer

Revenue: €40,000 (net) Expenses with VAT: €5,000 net (€950 input tax)

#### As a small business:

#### With standard taxation:

Result: In this example, you'd be €950 better off with standard taxation - exactly the input tax you get back.

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Required Information on Small Business Invoices

As a small business, you must include a required note on your invoices:

Standard wording:

"No VAT charged according to § 19 UStG."

Alternative wordings:

• "VAT exempt under § 19 UStG"
• "Under the small business regulation per § 19 UStG, the invoice amount contains no VAT"

All other mandatory information still applies:

• Name and address (you and customer)
• Tax number (not VAT ID)
• Invoice date and number
• Service description
• Service date
• Total amount

Important: Never show VAT! This would create a tax liability.

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How to Register as a Small Business

Step 1: Business Registration (if commercial)

At your local authority. Cost: €15-65.

Step 2: Tax Registration Questionnaire

The tax office sends you the questionnaire automatically. Important:

• Line 128: "Should the small business regulation be applied?" → Check YES
• State estimated revenue (keep under €22,000)

Step 3: Receive Tax Number

After 2-4 weeks, you'll receive your tax number. This goes on all invoices.

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Opting Out of the Small Business Regulation

You can voluntarily opt out of the small business regulation (§ 19 Para. 2 UStG):

When does it make sense?

• High investments with input tax planned
• Mainly B2B customers
• More professional appearance desired

Important to know:

• Opting out binds you for 5 years
• Apply informally to the tax office
• Can only be reversed after the 5 years

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What Happens When You Exceed the Limit?

Scenario: You exceed €22,000 in the current year

Example: In October, you reach €23,000 revenue.

Consequences:

1. From next year you're subject to standard taxation
2. In the current year you remain a small business
3. You must submit VAT advance returns
4. Old invoices don't need to be corrected

Scenario: You exceed €50,000 in the current year

Example: In September, you reach €52,000 revenue.

Consequences:

1. From exceeding the limit you're VAT liable
2. All invoices from this point must show VAT
3. Retroactive correction may be necessary

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Small Business and E-Invoicing 2025

Small businesses are also affected by the e-invoicing requirement:

Tip: Use software like Clever Invoice that supports e-invoices in XRechnung and ZUGFeRD format.

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Avoid Common Mistakes

1. Showing VAT

Problem: You write "19% VAT" on the invoice. Consequence: You owe the tax office this tax! Solution: Never show VAT, always include the required note.

2. Incorrectly calculating the limit

Problem: You calculate with gross amounts for purchases. Solution: The €22,000 limit refers to your revenue (for small businesses = gross = net).

3. Forgetting annualization at startup

Problem: You start in September and make €8,000 revenue. Solution: €8,000 ÷ 4 months × 12 = €24,000 → Limit exceeded!

4. Not thinking through opting out

Problem: You opt out but have hardly any input tax. Solution: Calculate exactly before opting out whether it's worth it.

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Small Business in International Trade

EU Customers (B2B)

• You need a VAT ID (possible even as a small business)
• Apply reverse charge procedure
• Submit recapitulative statement

EU Customers (B2C)

• Without OSS: Micro-business regulation up to €10,000 EU revenue
• With OSS: Registration in One-Stop-Shop

Third-country Customers

• No VAT for services
• Deliveries: Export is VAT-free

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Checklist: Small Business Regulation

Before registration:

• [ ] Create revenue forecast (< €22,000)
• [ ] Check B2B vs. B2C share
• [ ] Create investment plan
• [ ] Calculate standard taxation

During registration:

• [ ] Fill out questionnaire correctly
• [ ] Check small business option
• [ ] Give realistic revenue estimate

During operations:

• [ ] Track revenue monthly
• [ ] Required note on all invoices
• [ ] Don't show VAT
• [ ] Near limit: Plan strategically

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Conclusion: Using the Small Business Regulation Correctly

The small business regulation is ideal for:

✅ Founders with little startup capital ✅ Part-time self-employed ✅ Service providers with private customers ✅ Everyone who wants to minimize administration

It's less suitable for:

❌ B2B business with corporate customers ❌ High investments with input tax ❌ Fast-growing businesses

With Clever Invoice, you create legally compliant small business invoices in seconds - with automatic required notes, sequential invoice numbers, and e-invoicing. Start free now!