EU small businesses: Tax-free in Germany?
What’s new and why is it important?
The small business regulation is not only interesting for domestic self-employed persons, entrepreneurs from other EU countries can also benefit from it. If you are based in another EU member state, you can avoid VAT liability in Germany under certain conditions.
Since the reform on January 1, 2025, small businesses from the so-called “rest of the Community” (i.e. all other EU countries except Germany) can use the German small business regulation under certain conditions. The big advantage: there is no obligation to register with the German tax office, no advance VAT returns, no annual declaration.
What are the requirements?
For the tax exemption to apply in Germany, three key points must be fulfilled:
- Compliance with German turnover limits:
The entrepreneur’s turnover may not exceed €25,000 in the previous year and €100,000 in the current year.
➜ This is checked by the Federal Central Tax Office (BZSt) – based on the turnover reports from the home country. - EU-wide turnover below €100,000:
In addition, the total turnover of the entrepreneur in the entire EU area must not exceed this threshold – neither in the previous year nor in the current year. - Small business ID from the home country:
The entrepreneur must have a valid small business identification number assigned to him by his home tax authority.
Waiver possible – but with a commitment period
Those who prefer to work with VAT, for example because they calculate with input tax deduction, can voluntarily waive the tax exemption. This waiver is then valid for at least five calendar years. Only then can it be revoked, and only with effect for the future.
Conclusion:
For many small EU entrepreneurs who are only occasionally active in Germany, this regulation offers enormous simplifications. However, anyone who operates on a permanent basis, invests a lot or generates large turnover should carefully examine whether it is worth waiving the tax exemption in the long term.
