2025: New frontiers for small businesses
The new turnover limits at a glance:
The small business regulation was comprehensively revised as of January 1, 2025. This change brings both opportunities and challenges for small businesses and the self-employed. In particular, small business owners should keep an eye on the new turnover limits and the obligation to monitor turnover in order to avoid unexpected changes to standard taxation.
- Turnover in the previous year: maximum € 25,000 (net) and
- Turnover in the current year: maximum € 100,000 (net)
Important: If the €100,000 limit is exceeded in the current year, standard taxation automatically applies from this point onwards. This means that you are obliged to declare and pay VAT and submit advance VAT returns and an annual return from the turnover that exceeds the limit. The exemption remains in place for all sales until this limit is reached.
Practical example: Exceeding the turnover limit
Lena is a self-employed photographer and has benefited from the small business regulation for years. This means that she issues invoices without VAT and does not have to pay VAT to the tax office. Her customers, mainly private individuals, appreciate her transparent prices without additional tax surcharges.
In 2024, her business is running smoothly: she generates € 23,000 in turnover (net) – below the relevant limit of € 25,000 for the previous year. This means she will remain a small business owner in 2025.
But business is booming in 2025: Lena photographs numerous weddings and already achieves a turnover of €92,000 in October. A lucrative major order for a corporate event in November brings in a further €12,000. She thus exceeds the crucial €100,000 mark – her total turnover for the year is now €104,000 (net).
And now it gets exciting: Lena remains a small business owner up to the first €100,000. For sales in excess of this – i.e. €4,000 – she must immediately switch to standard taxation. In concrete terms, this means that she must declare VAT (in her case 19%) on sales in excess of €100,000. It is also obliged to submit advance VAT returns and becomes part of the regular VAT system. At the same time, it may also claim input tax on its own investments from this point onwards, for example for new cameras or software subscriptions.
For the following year 2026, Lena will also remain subject to regular taxation – from the very first euro she earns, even if she only generates turnover of € 40,000 in 2026. She only has the right to return to the small business regulation if she remains below the € 25,000 turnover threshold in 2026. In this case, she could apply for small business status again from 2027.
This example clearly shows how important it is to keep a close eye on your own sales development. Particularly when sales fluctuate greatly – for example due to seasonal peaks such as weddings or events – it can quickly happen that the limit is exceeded unnoticed.
When is the small business regulation really worthwhile?
The decision as to whether you use the small business regulation or not depends heavily on your target group and your investments:
- If you mainly provide services to private individuals or companies that are not entitled to deduct input tax (e.g. doctors or landlords), small business status gives you a competitive advantage. You can offer cheaper services or make a higher profit because you don’t have to charge VAT.
- If you mainly provide your services to companies entitled to deduct input tax, this status is of little use to you: they deduct the VAT anyway and you lose the input tax deduction on your own expenses.
Particularly in the case of high investments (e.g. for technology or equipment), it can make sense to waive the small business regulation in order to claim input tax.
Invoicing under the new regulation
Small businesses must also issue their invoices correctly from 2025. These must contain, among other things:
- Do not show sales tax
- Reference to the small business regulation (e.g. “Tax exemption for small businesses”)
- Name and address of entrepreneur and customer, tax number or small business ID, type and scope of the service and the remuneration
Important: If you accidentally show VAT, you are obliged to pay this to the tax office – even if you would actually be exempt from tax.
New: Small business regulation now also Europe-wide!
A big plus point: from 2025, you can also apply the small business regulation in other EU countries – without having to register for tax there. The prerequisite is participation in the special registration procedure of the Federal Central Tax Office (BZSt).
Limits for this:
- EU-wide turnover must not exceed €100,000 (net)
As soon as you exceed this limit, the exemption ends automatically and you must switch to standard taxation in the countries concerned.
Your next steps:
- Monitor your sales regularly so that you do not exceed the sales limit unnoticed.
- Consider whether you voluntarily waive the small business regulation – this can be worthwhile for large investments.
- Are you planning sales in other EU countries? Find out about the reporting procedure and make sure you comply with the limits.
Do you have questions or are you unsure whether the small business regulation is right for you? Let us advise you – together we will find the best tax solution for you and your business!
