Small Business and Input VAT in Germany: Can You Deduct It?

No, as a small business (Kleinunternehmer) you cannot deduct input VAT. Your sales are VAT-exempt, and VAT on services you use for exempt sales is excluded from deduction (§ 15 Abs. 2 UStG). The VAT on your purchase invoices is therefore part of your expense. If you want to deduct input VAT, the way is the switch to standard taxation.

Last updated: 29 October 2026

In short

No deduction: according to the Hessen tax office, a small business is not entitled to input VAT deduction.
Booking: you enter expenses at the gross amount; the input VAT line of the EÜR stays empty.
With the switch: after the switch to standard taxation you can claim input VAT in your VAT returns.

Why is there no input VAT deduction for small businesses?

Input VAT is the VAT another business charged you for a service. The rule on when you can deduct it is in § 15 UStG. You can deduct "the statutory tax on supplies and other services" that another business performed for your business (§ 15 Abs. 1 Nr. 1 UStG).

The deduction is excluded, though, for services you use to make exempt sales (§ 15 Abs. 2 Satz 1 Nr. 1 UStG). Your sales as a small business are exempt under § 19 Abs. 1 UStG. Together this means: no input VAT deduction. The Hessen tax office says it directly: you are not entitled to an input VAT deduction either.

What this means for you: you do not get the VAT a supplier charges you back from the tax office as a small business.

How do you book expenses without input VAT deduction?

You enter the expense at the amount you paid, so gross. An example with shipping boxes for 119 euros, of which 19 euros is VAT (our own figures, not advice on the rate):

	Small business	Standard taxation
Invoice amount	119.00 euros	119.00 euros
Business expense in the EÜR	119.00 euros	100.00 euros
Deductible input VAT	0.00 euros	19.00 euros

For purchases of assets the same principle applies: only the input VAT "insofar as it can be deducted" is not part of the acquisition cost (§ 9b Abs. 1 EStG). If nothing is deductible for you, the full amount counts. Which lines of the Anlage EÜR you fill in is shown in EÜR as a small business.

What this means for you: as a small business you book every purchase invoice at the gross amount.

When does the switch to standard taxation bring input VAT?

You reach standard taxation automatically if you exceed the turnover limits, or voluntarily by waiving under § 19 Abs. 3 UStG. The Hessen tax office names, as one reason for the waiver, that you want to claim input VAT. After the switch you declare the tax in your VAT returns and can claim input VAT at the same time (Hessen tax office).

The waiver binds you for at least five calendar years (§ 19 Abs. 3 Satz 3 UStG). The deadlines and the steps are in Switching to standard VAT. Whether the switch pays off depends on your turnover, customers and expenses; that is a question for tax advice.

What this means for you: you get input VAT only with standard taxation; in return you file VAT returns and issue invoices with VAT.

Does the same apply under the EU small business scheme?

Yes. If you use the small business exemption in other EU countries through the EU-KU scheme (§ 19a UStG), the right to deduct input VAT falls away with the exemption (BZSt). More on this scheme is in OSS for small businesses.

What this means for you: the exemption and input VAT deduction exclude each other under the EU scheme too.

Which mistakes happen often?

Entering input VAT in a VAT return while you are a small business. The tax office generally treats a VAT return under standard rules as a waiver (Hessen tax office).
Taking the VAT out of the expense. You book gross, not net.
Showing VAT on your own invoice. As a small business you may not show VAT separately (Hessen tax office); otherwise you owe the amount (§ 14c Abs. 1 UStG).

What this means for you: stay on one line: either small business with gross expenses or standard taxation with input VAT.

How VAT GPT helps

VAT GPT is the tax software for online sellers, self-employed people and small businesses in Germany. It calculates and files in one place, in this order:

the OSS return
VAT
the EÜR
trade tax
income tax

Upload: you upload your invoices and receipts; the AI reads amounts, countries and tax rates and sorts them into categories.
Check: you review and confirm the values in the EÜR overview.
Send: with VAT GPT Pro you send the Anlage EÜR through ELSTER to the tax office.

Whether you apply the small business scheme or waive it, you choose in the questionnaire for the tax registration of sole proprietors in VAT GPT. There are Free, Go (30 days free with all Pro features) and Pro. Try it for free

Frequently asked questions

Can a small business deduct input VAT? No. VAT on services you use for exempt sales is excluded from the input VAT deduction (§ 15 Abs. 2 UStG).

Do I get input VAT refunded as a small business? No, as long as you apply the small business scheme.

How do I book purchase invoices as a small business? With the gross amount as a business expense. The input VAT line of the Anlage EÜR stays empty.

When can I claim input VAT? After the switch to standard taxation, in the VAT returns (Hessen tax office).

What about input VAT from the time before the switch? This article gives no answer. It depends on the individual case and belongs with tax advice.