Small Business or Standard VAT in Germany: Which Fits Your Start?

You are a small business with at most 25,000 euros of turnover last year and 100,000 euros this year (§ 19 Abs. 1 UStG). Then you charge no VAT, but you cannot deduct input VAT either (§ 15 Abs. 2 Nr. 1 UStG). You choose between the two at the start. Waiving the scheme binds you for at least five years.

Last updated: 29 October 2026

In short

Small business: no VAT on invoices, no VAT returns, no input VAT deduction.
Standard taxation: 19 or 7 percent VAT on invoices, VAT returns, input VAT from purchases deductible.
Commitment: a waiver of the small business scheme lasts at least five calendar years (§ 19 Abs. 3 UStG).

What separates the two routes?

	Small business	Standard taxation
VAT on the invoice	none, your turnover is exempt	19 or 7 percent
Input VAT from purchases	not deductible (§ 15 Abs. 2 Nr. 1 UStG)	deductible
VAT return	generally none (§ 19 Abs. 1 Satz 2 UStG)	by the 10th day after the period (§ 18 Abs. 1 UStG)
Income tax and EÜR	remain	remain

What this means for you: As a small business you save the VAT returns but give up input VAT deduction; income tax applies either way.

Which limits apply?

Your total turnover in the previous calendar year may be at most 25,000 euros and in the current year at most 100,000 euros (§ 19 Abs. 1 UStG). It is counted on received payments, net, without turnover from fixed assets (§ 19 Abs. 2 UStG). According to the Hessian tax authority, the 25,000-euro limit generally applies in the year of founding; if you exceed it, the very sale that exceeds it is already taxable. More in German small business rule 2026.

What this means for you: Compare your expected net turnover for year one with 25,000 euros before you decide.

When does standard taxation pay off?

You buy a lot: high purchases at the start bring back input VAT that small businesses do not get.
Your customers are businesses: they usually deduct the VAT as input VAT, so the surcharge costs them little.
You expect more than 25,000 euros in the year of founding: then the small business scheme ends with the sale that exceeds the limit (Hessian tax authority).

The small business scheme often fits if you sell to private customers and buy little; there a price without surcharge helps directly.

What this means for you: Heavy purchasing or business customers often favour standard taxation; low costs and private customers favour the small business scheme.

How do you waive, and how do you go back?

You declare the waiver to the tax office irrevocably by the end of February of the second year after the tax period; it applies from the start of that year and binds you for at least five calendar years. You can revoke it with effect from the start of a later calendar year (§ 19 Abs. 3 UStG). For the switch see Switching from the small business scheme to standard VAT; if you exceed a limit, Small business limit exceeded.

What this means for you: Decide for more than the first year, because the commitment runs five years.

How VAT GPT helps

Upload: invoices and receipts; the AI reads amounts, countries and tax rates.
Check: you review the values; under standard taxation, turnover and input VAT go into the VAT return.
Send: with Pro the VAT return goes through ELSTER to the tax office.

Not included: no decision for you and no tax advice. There are Free, Go (30 days free with all Pro features) and Pro (49 € a month or 444 € a year, incl. VAT). Try it for free

Frequently asked questions

Can I start as a small business and switch later? Yes. You can waive the scheme by the last day of February of the second following year; the waiver binds you for at least five calendar years (§ 19 Abs. 3 UStG). If you exceed a limit, the scheme ends anyway.

Do I have to file VAT returns as a small business? Generally no, the filing duties do not apply (§ 19 Abs. 1 Satz 2 UStG); exceptions are explained in VAT return for small businesses.

May I deduct input VAT as a small business? No, tax on purchases used for exempt turnover is excluded from deduction (§ 15 Abs. 2 UStG).