EÜR or balance sheet? The right profit determination for your business
Cash-basis P&L (EÜR) or balance sheet – this is one of the first questions you'll face as a business owner. The answer determines how much effort your bookkeeping takes, when you pay taxes, and how deeply the tax office (Finanzamt) looks into your figures. The good news: in the vast majority of cases, you're allowed to choose the simple option. Here you'll learn which method of determining profit is right for your business, where the decisive thresholds lie in 2026, and when the option to choose turns into an obligation.
Two ways to determine your profit
German tax law recognizes two fundamental methods for determining profit. Which one applies to you depends on your legal form, your activity, and your figures.
The cash-basis P&L (EÜR) under § 4 para. 3 EStG is the lean option. Put simply: you set your business income against your business expenses, and the difference is your profit. No balance-sheet accounts, no double-entry bookkeeping, no stocktaking, no balance sheet.
Balance-sheet accounting (Bilanzierung) – also known as double-entry bookkeeping or the net-worth comparison method (Betriebsvermögensvergleich) under § 4 para. 1 or § 5 EStG – is the more demanding route. Here you keep books with debits and credits, and at year-end you carry out a stocktake, prepare a balance sheet, and produce a profit-and-loss statement. Profit results from comparing the business assets at the start and end of the year.
Who can use the EÜR?
The EÜR is the right choice for you if you belong to one of these groups and don't exceed the bookkeeping thresholds:
- Freelance professionals (Freiberufler) (§ 18 EStG) – for example doctors, lawyers, architects, tax advisors, journalists, or IT consultants. They may always use the EÜR regardless of revenue and profit, as long as they don't voluntarily prepare a balance sheet.
- Smaller commercial traders and sole proprietors who stay below the thresholds of § 141 AO.
- Farmers and foresters below certain thresholds.
- Sole traders not entered in the commercial register (Handelsregister) who don't exceed the thresholds of § 241a HGB.
The decisive point: if you're not required to keep books, you have a choice. You may use the EÜR, but you don't have to – voluntary balance-sheet accounting is permitted (though rarely sensible in practice, because it's more work).
When does balance-sheet accounting become mandatory? The thresholds in 2026
You're obliged to prepare a balance sheet if you either have a legal form that requires it or you breach the revenue and profit thresholds.
Always required to keep books – regardless of the figures:
- Corporations such as the GmbH and the UG (haftungsbeschränkt)
- Commercial partnerships such as the OHG and KG
- Merchants entered in the commercial register (Handelsregister), i.e. registered sole merchants (e.K.)
These legal forms are required to keep books under commercial law (§ 238 HGB) – and this commercial-law obligation also carries over to tax law via § 140 AO.
Bookkeeping obligation upon exceeding the thresholds (§ 141 AO): For commercial traders who aren't already entered in the commercial register, the tax office (Finanzamt) checks two thresholds. For the year 2026, these apply:
| Criterion | Threshold 2026 |
|---|---|
| Revenue (total revenue per calendar year) | more than 800,000 € |
| Profit from commercial operations (per fiscal year) | more than 80,000 € |
Important: it's enough if you exceed one of the two thresholds. A widespread misconception is that both values have to be breached at the same time – that's not true. Incidentally, the same thresholds (800,000 € / 80,000 €) also apply under § 241a HGB to unregistered sole merchants.
Tip: The bookkeeping obligation under § 141 AO doesn't take effect automatically, but only once the tax office (Finanzamt) formally requires it of you in writing – and then at the earliest from the following fiscal year. So you have lead time to switch over. Even so, don't wait until the last minute if your revenue is growing.
The cash-in/cash-out principle: the big difference in day-to-day practice
The most important practical difference between the EÜR and the balance sheet is the timing of when income and expenses are recorded.
With the EÜR, the cash-in/cash-out principle applies (Zufluss-Abfluss-Prinzip) (§ 11 EStG): income counts in the year in which the money actually arrives in your account. An expense counts in the year in which you actually pay it. When you wrote or received the invoice is irrelevant – only the payment date matters.
With balance-sheet accounting, the realization principle (Realisationsprinzip) applies: revenues and expenses are assigned to the period they economically belong to – usually the invoice date, regardless of whether payment has already been made. Outstanding invoices (receivables) and unpaid incoming invoices (payables) end up on the balance sheet.
An example: on December 20, 2026, you issue an invoice for 5,000 €, but the money doesn't arrive until January 2027.
- With the EÜR, the revenue counts in 2027 – only then has the money been received.
- With a balance sheet, the revenue already counts in 2026, because the service has been rendered.
For the EÜR, this opens up a certain amount of room for tax planning: you can deliberately pull payments and purchases forward or push them into another year to smooth out your profit. (Watch out for the 10-day rule for regularly recurring payments around the turn of the year – it can undermine this effect.)
Pros and cons at a glance
| EÜR | Balance sheet | |
|---|---|---|
| Effort | low | high |
| Stocktake required | no | yes |
| Timing of profit | on payment (cash-in/cash-out) | on economic realization |
| View of liquidity | directly visible | less direct |
| Tax planning around year-end | flexible | barely possible |
| Informative value for banks/investors | limited | high |
| Who typically uses it | freelancers, small businesses | GmbH, UG, larger companies |
In short: the EÜR is simpler, cheaper, and closer to your actual cash position. The balance sheet is more demanding, but gives you and third parties a more complete picture of your business – for instance when applying for a loan or when investors come on board.
Two typical examples
Anna, freelance designer (sole proprietor): She generates 90,000 € in revenue and 55,000 € in profit per year. Because she works as a creative self-employed professional and stays well below both thresholds, she uses the EÜR. Her bookkeeping is manageable: income minus expenses, and the EÜR is filed electronically with the tax office (Finanzamt) as the "Anlage EÜR." No annual financial statements, no stocktake.
Berg & Sohn GmbH (a trades business): As a GmbH, the company is required to keep books by virtue of its legal form – entirely regardless of revenue or profit. Even with a small result, a full balance sheet together with a profit-and-loss statement must be prepared and disclosed in the Federal Gazette (Bundesanzeiger). Here there's no way around double-entry bookkeeping.
Which method of determining profit suits you – and how Buchführungsheld helps
For most solo self-employed people, freelance professionals (Freiberufler), and smaller commercial businesses, the EÜR is the right choice because it's the simplest. But as soon as you found a GmbH or UG, or grow past the 800,000 € or 80,000 € threshold, the balance sheet becomes mandatory – and the effort rises noticeably.
This is exactly where Buchführungsheld comes in: you simply upload your receipts, and real bookkeepers handle the ongoing entries and your advance VAT return (Umsatzsteuervoranmeldung) – at a fixed price. Whether it's the EÜR or preparation for a balance sheet: you don't have to decide yourself where each receipt belongs. You'll find an overview of what's included on the Features page, and the terms under Pricing. Not sure which method of determining profit applies to your situation? Then it's best to book a free preliminary consultation – we'll look at your figures together.
Frequently asked questions
Can I voluntarily switch from the EÜR to a balance sheet?
Yes. If you're not required to keep books, you have a choice and may voluntarily prepare a balance sheet – for example because a bank requires it for a loan. However, once you make a voluntary switch, you're generally bound to it for three years. Conversely, switching back to the EÜR is only possible if you (once again) meet the requirements for it.
Do I have to file the EÜR electronically?
Yes. The cash-basis P&L (EÜR) is, as a rule, transmitted electronically and authenticated to the tax office (Finanzamt) as the "Anlage EÜR" – together with your tax return. An informal statement on paper is generally no longer sufficient.
What happens if I exceed the bookkeeping thresholds?
If, as a commercial trader, you exceed the revenue or profit threshold, the tax office (Finanzamt) will require you in writing to keep books. The obligation then begins at the earliest in the following fiscal year. So you have time to switch your bookkeeping over – ideally with professional support.
Do I pay less tax with the EÜR than with a balance sheet?
Over the entire lifetime of your business, the total profit works out the same – the method only shifts which year a profit falls into. In the short term, however, the EÜR can bring liquidity and planning advantages thanks to the cash-in/cash-out principle (Zufluss-Abfluss-Prinzip), because you can influence the timing of payments.
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