Small-business regulation 2026: pros and cons at a glance

Just starting out as a freelancer or running a small business on the side – and wondering whether the small-business rule (Kleinunternehmerregelung) makes sense for you in 2026? The rule under § 19 UStG saves you a whole lot of paperwork, but it also comes with a real catch. In this article you'll get both sides clearly explained: the higher revenue thresholds since 2025, when opting out pays off, and for whom the Kleinunternehmerregelung tends to become a cost trap.

What is the small-business rule (Kleinunternehmerregelung) under § 19 UStG?

The Kleinunternehmerregelung is a simplification in VAT law. If you use it, the tax office (Finanzamt) treats you, for VAT purposes, almost like a private individual: you show no VAT on your invoices, you don't remit any VAT, and normally you don't have to file an advance VAT return (Umsatzsteuervoranmeldung) either.

The price for this: in return, you also get no input VAT (Vorsteuer) back. The VAT you yourself pay when buying goods, software, or equipment stays a real cost factor for you – you can't reclaim it from the Finanzamt.

Important: the Kleinunternehmerregelung concerns VAT only. Income tax, trade tax, and your bookkeeping obligations are unaffected by it. So you still have to prepare a cash-basis P&L (EÜR) and file your income tax return.

Revenue thresholds for 2026: Who can be a Kleinunternehmer?

Since January 1, 2025, new, significantly higher revenue thresholds have applied – and they remain unchanged in 2026 as well. You may use the Kleinunternehmerregelung if both of the following conditions are met:

• 25,000 euros in total revenue in the previous calendar year was not exceeded
• 100,000 euros in total revenue in the current calendar year is not exceeded

For comparison: until the end of 2024, the thresholds were still 22,000 euros (previous year) and 50,000 euros (current year). The increase was therefore noticeable – especially for growing side businesses.

One important point also changed in 2025: the former revenue forecast for the current year has been dropped. What counts now is actual revenue. If you exceed the 100,000-euro threshold during the year, you switch to standard taxation (Regelbesteuerung) immediately – specifically from the transaction with which you break through the threshold. After that, you have to show VAT.

Tip: Don't calculate the 25,000 euros too tightly. What counts is the total revenue of a calendar year, not the profit. If you started the business in the middle of the year, you have to extrapolate your revenue to the full year in order to check whether you can still remain a Kleinunternehmer the following year.

The advantages of the small-business rule (Kleinunternehmerregelung)

For many founders and part-time entrepreneurs, the Kleinunternehmerregelung is attractive in 2026 – above all for two reasons:

• Less bureaucracy: No VAT on invoices, generally no monthly or quarterly advance return, no VAT reconciliation. That saves time and nerves.
• Price advantage with private customers: For end consumers who can't deduct input VAT, your prices are effectively up to 19% cheaper than those of a VAT-liable competitor – or, at the same final price, you have a higher margin.
• Easy start: Since 2025, as a new founder you automatically start out as a Kleinunternehmer, provided you're likely to stay within the thresholds. You don't have to forecast anything.

Example: When the price advantage matters

Nadine gives yoga classes for private customers. As a Kleinunternehmerin, she charges 80 euros per class – without VAT. A provider under standard taxation would have to add another 19% on top of the same net price, i.e. charge 95.20 euros. Since Nadine's customers can't reclaim the VAT, she is simply cheaper. And because she has hardly any VAT-liable expenses, she loses almost nothing from the missing input VAT deduction.

The disadvantages: When the rule becomes a trap

The Kleinunternehmerregelung is not automatically the better choice. In these cases you may end up losing money:

• High investments at the start: If you buy expensive equipment, vehicles, or software, as a Kleinunternehmer you give away the input VAT. On an investment of 20,000 euros net, that's around 3,800 euros that you do not get back.
• Predominantly business customers (B2B): Your corporate customers deduct the VAT as input VAT anyway – for them it doesn't matter whether you show it. Your "price advantage" fizzles out, while you yourself don't reclaim any input VAT.
• Signaling effect: Some business partners read the small-business note on an invoice as a sign of a very small company. That's rarely a deal-breaker, but it is a factor.
• Growth brake in your head: Anyone operating close to the 25,000-euro threshold sometimes unconsciously slows their own growth in order to keep the status. That's rarely economically sensible.

Example: When opting out pays off

Tim is founding a small photo studio and invests 15,000 euros net in cameras, lighting, and computers in the first year. If he voluntarily opts out of the Kleinunternehmerregelung, he reclaims around 2,850 euros in input VAT. His customers are predominantly agencies that deduct the VAT anyway. For Tim, standard taxation is clearly the better choice from the very beginning.

Switching and opting out: How it works

You're not bound to your decision forever – but there are deadlines you should be aware of.

Situation	What happens
Voluntary waiver of § 19 UStG	You switch to standard taxation (Regelbesteuerung) and are bound to it for 5 calendar years.
Deadline for opting out	Declaration to the tax office (Finanzamt) by the end of February of the year after next at the latest.
Previous-year threshold (25,000 €) exceeded	From the following year, you are automatically under standard taxation.
100,000 € exceeded in the current year	Switch during the year – from the transaction that breaks through the threshold, standard taxation applies.

After the 5-year binding period ends, you can switch back to the Kleinunternehmerregelung at the start of a calendar year – provided you stay within the revenue thresholds.

Tip: Even as a Kleinunternehmer you have to put a note about the tax exemption on every invoice, for example: "Pursuant to § 19 UStG, no VAT is charged." This also applies to small-amount invoices (Kleinbetragsrechnungen).

Stay a Kleinunternehmer or switch – let us take it off your hands

Whether the Kleinunternehmerregelung pays off for you in 2026 depends on your investments, your customer structure, and your growth plans. This is exactly the assessment we take off your hands at Buchführungsheld: real bookkeepers review your figures, keep an eye on the revenue thresholds for you, and get in touch before you unknowingly slip into standard taxation. You just upload your receipts – we handle the rest at a fixed price. If you're unsure which path is right for you, book a free preliminary consultation, and we'll look at your situation together.

Frequently asked questions

How high are the revenue thresholds for Kleinunternehmer in 2026?

They are 25,000 euros in revenue in the previous year and 100,000 euros in the current calendar year. Both thresholds must be met. These figures have applied since 2025 and remain unchanged in 2026.

Do I have to file an advance VAT return (Umsatzsteuervoranmeldung) as a Kleinunternehmer?

As a rule, no. Because you don't show or remit any VAT, the monthly or quarterly advance return normally doesn't apply. However, you still have to file an income tax return and your EÜR.

Is the Kleinunternehmerregelung worthwhile with many business customers?

Usually not. Your corporate customers deduct the VAT as input VAT anyway, so whether you show it makes no difference to them. But you yourself lose the input VAT deduction. With predominantly B2B customers and higher expenses, standard taxation is often cheaper.

What happens if I exceed the 100,000-euro threshold during the current year?

Then you switch to standard taxation immediately – specifically from the transaction with which you exceed the threshold. From that point on, you have to show and remit VAT. The annual forecast that used to be customary has been dropped since 2025.