LumenDo small businesses and freelancers in Germany have to charge VAT?
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Not if they qualify as small businesses under § 19 of the VAT Act: their turnover was no more than €25,000 in the previous calendar year and stays no more than €100,000 in the current year. Their sales are then VAT-exempt. They can waive this, but the waiver binds them for at least five calendar years.
Key facts
| What | The law says | Source |
|---|---|---|
| Who qualifies | Entrepreneurs established in Germany (or the areas in § 1(3) UStG) | UStG § 19(1) |
| Previous calendar year | Total turnover no more than €25,000 | UStG § 19(1) sentence 1 |
| Current calendar year | Total turnover does not exceed €100,000 | UStG § 19(1) sentence 1 |
| Effect | The entrepreneur’s sales are exempt from VAT | UStG § 19(1) sentence 1 |
| What counts as turnover | Taxable sales, calculated on payments received, minus certain exempt sales; sales of fixed assets left out | UStG § 19(2) |
| VAT returns | § 18(1)–(4) UStG filing duties don’t apply; the tax office can still demand a return | UStG § 19(1) sentence 2 |
| Opting out | Irrevocable declaration to the tax office, possible until the last day of February of the second year after the tax period; binds for at least five calendar years | UStG § 19(3) |
| Businesses established elsewhere in the EU | EU-wide annual turnover at most €100,000 in the previous and current year, plus a small-business identification number from the home state | UStG § 19(4) |
The two turnover limits
The VAT Act (Umsatzsteuergesetz, UStG § 19(1)) exempts the sales of a small entrepreneur (Kleinunternehmer) established in Germany when both conditions are met:
- total turnover in the previous calendar year did not exceed €25,000, and
- total turnover in the current calendar year does not exceed €100,000.
Total turnover (Gesamtumsatz) is the sum of the entrepreneur’s taxable sales, calculated on payments received (vereinnahmte Entgelte). Certain sales that are exempt under § 4 UStG are deducted, and sales of the business’s fixed assets are left out (UStG § 19(2)).
What the exemption changes
The sales are exempt from VAT. In those cases the law says the rules on exempt intra-EU supplies (§ 4 no. 1(b), § 6a), on waiving exemptions (§ 9), on showing VAT identification numbers on invoices in the cases of § 14a, and on VAT returns (§ 18(1)–(4)) don’t apply. The tax office can still require you to file a return (§ 149(1) sentence 2 AO), and § 18(4a) UStG still applies (UStG § 19(1) sentence 2).
Opting out
A small entrepreneur can declare to the tax office that they waive the exemption. The declaration is irrevocable and can be made until the last day of February of the second calendar year after the tax period. It takes effect from the beginning of the tax period it is meant to cover, binds the entrepreneur for at least five calendar years, and can then be revoked with effect from the start of a later calendar year (UStG § 19(3)).
Businesses based elsewhere in the EU
An entrepreneur established in another EU state can use the exemption if their annual turnover in the EU did not exceed €100,000 in the previous calendar year and does not exceed it in the current year, and their home state has issued them a valid small-business identification number for this purpose (UStG § 19(4)). The exemption doesn’t apply to intra-EU supplies of new vehicles (UStG § 19(6)).
Related questions
- Registering your activity with the tax office: see the Germany freelancer registration page.
Sources
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This is general information, not legal advice, and Lumen is not a law firm. Rules change and offices differ: check the official sources above before you act. Found something wrong or out of date? Write to support@lumen.observer.