Small Business VAT Exemption Germany 2026 (§19 UStG): Threshold, Invoicing and Trade-offs

Germany's small business VAT exemption (§19 UStG, known as the Kleinunternehmerregelung) lets self-employed people and small companies invoice without charging VAT. Since 2025, a new and higher revenue threshold applies. This article explains who qualifies, how to invoice correctly as a Kleinunternehmer and when the exemption doesn't make financial sense.

What is the Kleinunternehmerregelung?

The small business VAT exemption under §19 UStG allows you to issue invoices without charging VAT. You don't collect or remit VAT to the Finanzamt — but in return, you also can't reclaim input VAT on your own business purchases. The exemption applies to freelancers, sole traders and small businesses with low annual revenue.

New thresholds for 2025 and 2026

From 2025, the following limits apply:

• Prior year revenue under €25,000 net — increased from the previous €22,000 threshold.
• Current year revenue under €100,000 net — exceeding this triggers immediate VAT liability.

The exemption also applies to GmbHs and UGs with sufficiently low revenues. Newly founded businesses can use it in their first year if their expected revenue for the current calendar year stays below €25,000.

How to invoice as a Kleinunternehmer

As a Kleinunternehmer, your invoices must not show any VAT. Required fields include:

• Full name and address
• Tax number (Steuernummer) or VAT ID (USt-IdNr.)
• Invoice date and sequential invoice number
• Service description and date/period of service
• Net amount — no VAT shown
• Mandatory note: "Kein Ausweis der Umsatzsteuer gemäß §19 UStG" (No VAT charged pursuant to §19 UStG)

Important: you must not show any percentage or VAT amount — not even "0% VAT". The §19 UStG reference is mandatory.

Benefits of the exemption

• Less admin: no monthly or quarterly VAT returns to file.
• Competitive pricing for private customers: no VAT mark-up means potentially lower prices for end consumers.
• Simpler bookkeeping: no need to separate net and gross amounts.

Downside: no input VAT deduction

The main drawback: you can't reclaim VAT on your business purchases. If you buy equipment, software or office supplies and pay 19% VAT, that cost stays with you.

Example: A €1,000 laptop costs you €1,190 as a Kleinunternehmer — but only €1,000 net for a VAT-registered business (which reclaims the €190 as input tax).

When does the exemption make sense?

The Kleinunternehmerregelung makes most sense when you primarily serve private (B2C) customers, your business expenses are low, and you're in the early stages with uncertain revenue. It makes less sense if you mainly work with B2B clients (who can reclaim VAT anyway) or regularly invest in expensive equipment or software.

Conclusion

Germany's small business VAT exemption is a great way for newcomers to start with less bureaucracy. The 2025 threshold increase to €25,000 makes it accessible to more freelancers. Once you grow beyond it, you'll need proper VAT tracking and bookkeeping — Norman AI Bookkeeping handles VAT returns and receipts automatically. Learn more about taxes for the self-employed in Germany.