What Is the Kleinunternehmerregelung? Germany's Small Business VAT Exemption
The Kleinunternehmerregelung is Germany's small business VAT exemption. If your annual revenue stays below a certain threshold, you can choose not to charge value-added tax on your invoices. You do not collect VAT from your clients and you do not remit it to the tax office. In return, you also cannot deduct VAT on your own business expenses.
For freelancers, sole traders, and anyone just starting a business in Germany, this is one of the most common tax arrangements. It simplifies your invoicing, reduces your accounting overhead, and keeps your pricing straightforward, especially when your clients are end consumers or small businesses that cannot reclaim VAT themselves.
The trade-off is that you lose the ability to reclaim input VAT. If you spend heavily on equipment, software, or materials, the VAT you pay on those purchases becomes a cost you absorb rather than deduct. Whether the simplicity is worth that trade-off depends entirely on your specific situation.
Kleinunternehmerregelung Revenue Threshold 2026: Who Qualifies
The Kleinunternehmerregelung is available to businesses and self-employed individuals whose revenue falls below defined thresholds. Two numbers matter: your net turnover from the previous calendar year and your expected net turnover for the current year.
Since January 2025, the qualifying thresholds in Germany have been updated. Your revenue in the previous year must not have exceeded €25,000, and your expected revenue in the current year must not exceed €100,000. If both conditions are met, you are eligible to opt into the exemption.
These thresholds were raised from the previous limits, which were considerably lower. The updated figures mean that more small businesses and freelancers now qualify than before, making the exemption relevant to a broader range of self-employed professionals.
When you first register your business with the tax office, you will be asked whether you want to use the Kleinunternehmerregelung. That is where you make the choice. If you opt in, you are generally committed for the current year, though you can switch to regular VAT taxation voluntarily at any point. Switching back to the exemption after opting out comes with a waiting period.
If you are starting a business mid-year, the €100,000 current-year threshold applies as a flat limit — there is no proportional calculation based on the months remaining. You simply need to reasonably expect that your total net turnover for the remainder of the year will not exceed €100,000.
How to Write a Kleinunternehmer Invoice Without VAT
This is where most questions come up. Invoices issued under the Kleinunternehmerregelung look slightly different from standard VAT invoices, and getting the details right matters for both compliance and professionalism.
Kleinunternehmer Invoice Requirements: What to Include
Your invoices still need to contain all the information that any professional invoice requires: your full name and address, your client's name and address, a unique sequential invoice number, the invoice date, the date the service was performed or goods were delivered, a clear description of each line item with quantity and unit price, and your payment details including your IBAN. For a complete checklist of what belongs on a professional invoice see our invoice writing guide.
How to Show the VAT Exemption on Your Invoice
The key difference is that you do not show any VAT on the invoice. There is no VAT rate, no VAT amount, and no net-plus-VAT breakdown. Your invoice total is the final amount the client pays.
You also need to include a note on the invoice explaining why no VAT is being charged. This is typically a short sentence stating that you are operating under the small business VAT exemption. A common wording is something like: "No VAT charged under the small business exemption (Kleinunternehmerregelung)." The exact phrasing is flexible, but the note needs to make clear that the absence of VAT is intentional and based on your tax status, not an oversight.
Your tax number
Kleinunternehmer invoices must include your tax identification number (Steuernummer). A VAT ID (USt-IdNr.) is not required since you are not registered for VAT purposes, though some Kleinunternehmer obtain one anyway for cross-border transactions within the EU.
Common Kleinunternehmer Invoice Mistakes to Avoid
One of the most frequent errors is accidentally showing a VAT rate or amount on an invoice while operating as a Kleinunternehmer. This is not just a formatting issue. If you show VAT on an invoice, you owe that amount to the tax office regardless of your Kleinunternehmer status. The invoice itself creates the tax obligation.
Another common mistake is forgetting the exemption note entirely. While this does not create a tax liability the way charging VAT would, it can cause confusion for your clients and their bookkeeping teams, and it does not meet the formal requirements for a Kleinunternehmer invoice.
A third issue is using invoicing software that was not designed to handle the exemption properly. Some tools will default to adding a VAT line or generate structured invoice data that does not reflect the exemption correctly. If you are using e-invoicing software, the XML data embedded in the file needs to be just as accurate as what appears on the visual PDF.
Do Kleinunternehmer Need E-Invoicing in Germany?
Germany's e-invoicing mandate has been rolling out since January 2025, and Kleinunternehmer have a specific position within it. Understanding what applies to you avoids unnecessary stress or over-compliance.
Receiving e-invoices is mandatory
Every business in Germany, including Kleinunternehmer, must be able to receive structured e-invoices since January 2025. If a supplier sends you a ZUGFeRD or XRechnung invoice, you are required to accept and store it properly. You cannot ask them to send a plain PDF instead.
In practice, this means having an email inbox that can receive e-invoice files and ideally software that can display the structured data. For most Kleinunternehmer this is straightforward, since the invoices you receive will look like normal PDFs with embedded machine-readable data.
Sending e-invoices is currently optional
Kleinunternehmer are exempt from the obligation to send structured e-invoices. You can continue issuing your invoices as regular PDFs, paper documents, or any other format your clients accept.
This exemption is practical because the volume and complexity of invoicing for most Kleinunternehmer does not justify mandating the structured format. That said, the exemption may not remain in place indefinitely as Germany continues to digitise its tax infrastructure.
Why sending e-invoices voluntarily makes sense
Even though you are not required to send structured e-invoices, doing so has real advantages. Clients with automated invoice processing will handle your invoices faster, which often means faster payment. It signals professionalism and forward-thinking. And if you eventually cross the revenue threshold and switch to regular VAT, your e-invoicing workflow will already be in place rather than something you need to scramble to set up.
If your invoicing software supports ZUGFeRD at no extra cost, there is very little reason not to use it. For a full breakdown of Germany's e-invoicing timeline and requirements see our e-invoicing Germany guide.
Kleinunternehmerregelung vs Regelbesteuerung: When to Switch
The Kleinunternehmerregelung is not always the best option, even when you qualify. There are specific situations where opting for regular VAT taxation works out better financially.
Your clients are all businesses
If your client base is exclusively B2B, the VAT you charge is something they deduct from their own VAT returns. It is a pass-through cost for them and does not make your services more expensive in real terms. In this scenario, charging VAT allows you to deduct the VAT on your own business expenses, including software subscriptions, equipment, office rent, and professional services. For freelancers with meaningful recurring expenses, this can translate into significant annual savings.
You have high startup or equipment costs
If you are investing heavily in your business, particularly in the early stages when you are buying equipment, setting up a workspace, or paying consultants, the VAT on those purchases is money you cannot recover as a Kleinunternehmer. Running the numbers for your first year or two will tell you whether the input VAT deduction outweighs the administrative simplicity of the exemption.
You are approaching the revenue threshold
If your revenue is trending toward the limit and you expect to cross it within the next year, switching proactively gives you time to adjust your pricing, update your invoicing setup, and communicate the change to clients without the pressure of a forced mid-year transition.
The French Equivalent: Franchise en Base de TVA
If you work with clients in both Germany and France, or are considering expanding into the French market, the franchise en base de TVA is France's equivalent of the Kleinunternehmerregelung. It works on the same basic principle but with different thresholds and some administrative differences worth knowing about.
Under the franchise en base de TVA, French businesses below certain revenue thresholds are exempt from charging and collecting VAT. The thresholds vary depending on whether your activity is classified as sales of goods or provision of services, with service providers generally having a lower threshold than retailers.
Just like in Germany, French businesses operating under this exemption must include a specific note on their invoices explaining why no VAT is charged. The standard French wording references the exemption and makes clear that the invoice total is the final amount with no VAT component. A typical mention reads: "TVA non applicable, article 293 B du CGI."
France is also implementing its own mandatory e-invoicing system with a phased rollout. Businesses under the franchise en base de TVA will need to comply with receiving obligations as they take effect, mirroring how Kleinunternehmer in Germany must already accept incoming e-invoices. For the full picture of France's e-invoicing mandate see our France freelancer e-invoicing guide.
One invoicing setup for both markets
Here is the practical advantage for freelancers working across both countries: ZUGFeRD and Factur-X are technically identical formats from version 2.1 onwards. A single compliant e-invoicing setup covers both the German and French markets without separate tools or configurations.
If you generate ZUGFeRD 2.4 invoices at the EN 16931 profile level, you are simultaneously generating Factur-X compliant invoices. One tool, one workflow, two markets covered. For more detail on how these formats relate see our Factur-X and ZUGFeRD compliance guide.
Cross-Border Invoicing as a Kleinunternehmer
Invoicing clients in other EU countries while operating under the Kleinunternehmerregelung requires some additional attention. The domestic VAT exemption applies to transactions within Germany, but cross-border B2B services follow different rules.
When you provide services to a business client in another EU member state, the reverse charge mechanism typically applies. The client handles the VAT in their own country, and your invoice should not include German VAT. You need to reference the reverse charge on the invoice and include the client's VAT number. For these transactions you will usually need a VAT ID even as a Kleinunternehmer. For a complete explanation of how the reverse charge works see our VAT reverse charge guide.
Cross-border B2B service revenue is generally treated separately from your domestic revenue when determining your Kleinunternehmerregelung eligibility, though the specifics depend on the type of service provided. If you are doing significant cross-border work, getting professional tax advice for your particular situation is worth the investment.
Frequently Asked Questions
Can I switch from Kleinunternehmer to regular VAT mid-year?
You can voluntarily opt into regular VAT taxation at any time. However, once you make the switch, there is a binding period before you can return to the Kleinunternehmerregelung. This prevents businesses from switching back and forth based on short-term convenience.
What happens if I exceed the revenue threshold during the year?
It depends on which threshold you cross. If your net turnover in the previous year exceeded €25,000, you lose your Kleinunternehmer status from January 1 of the following year. If your net turnover crosses €100,000 during the current year, you lose your status immediately — from the very invoice that pushes you over the limit, you must charge VAT on all subsequent invoices. In both cases you gain the ability to deduct input VAT on your business expenses once you switch. Monitoring your revenue in real time helps avoid being caught off guard.
Do I need to file VAT returns as a Kleinunternehmer?
Kleinunternehmer are not required to file periodic VAT returns (Umsatzsteuervoranmeldungen). The annual VAT return obligation has also been abolished for Kleinunternehmer from the 2024 tax year onward — the last required annual VAT return was for 2023. The only exception is if you had reverse charge transactions with EU suppliers, in which case a VAT declaration may still be required for those specific transactions. Confirm with your Steuerberater if this applies to you.
Can I invoice clients in other EU countries as a Kleinunternehmer?
Yes. For B2B services to businesses in other EU countries, the reverse charge mechanism usually applies and you invoice without VAT while noting the reverse charge. For sales to individual consumers in other EU countries, different rules may apply depending on what you are selling. Cross-border e-commerce has its own thresholds that are separate from the Kleinunternehmerregelung.
Is the Kleinunternehmerregelung available to all business types?
The exemption is available to all business types that meet the revenue threshold, including freelancers, sole traders, and partnerships. It is most commonly used by freelancers and sole proprietors due to the revenue limits involved.
Do I need a VAT number (USt-IdNr.) as a Kleinunternehmer?
A VAT identification number is not required for domestic invoicing under the Kleinunternehmerregelung since you are not registered for VAT purposes. However, if you provide services to business clients in other EU countries, you will typically need a VAT ID for the reverse charge mechanism. You can apply for one through your local tax office without giving up your Kleinunternehmer status.
This article reflects the rules and thresholds in effect at the time of publication (April 2026). Tax regulations can change — if in doubt, consult a qualified tax advisor for your specific situation.
Start Invoicing the Right Way from Day One
Whether you are a Kleinunternehmer keeping your invoicing simple or preparing for the eventual transition to regular VAT, having the right invoicing setup from the beginning saves time and prevents compliance issues later. Your invoices need the correct exemption notes, your structured data needs to reflect your VAT status accurately, and as e-invoicing mandates expand across Europe, your tools need to handle all of this without requiring you to become a tax compliance specialist.
Facturwise generates ZUGFeRD 2.4 and Factur-X compliant e-invoices that correctly handle the Kleinunternehmer VAT exemption in the embedded XML data, not just on the visible PDF. Whether you invoice clients in Germany, France, or across the EU, every document meets the EN 16931 standard from the free plan onward. No special configuration, no paid upgrades, and no compliance guesswork.
Getting your invoicing right from the start means you will never have to fix it later when the stakes are higher and the deadlines are tighter.
Facturwise is an e-invoicing platform built for freelancers and small businesses in Europe. Every invoice includes embedded Factur-X and ZUGFeRD XML at the EN 16931 profile level, with correct handling of VAT exemptions including the Kleinunternehmerregelung. Create your first compliant invoice for free.