Kleinunternehmer

Kleinunternehmer is a term used in German tax law to describe a very small business owner who can benefit from the Kleinunternehmerregelung (small business regulation) under § 19 of the Umsatzsteuergesetz (UStG). The designation concerns value-added tax (VAT) treatment and does not create a separate legal status for the business.

Eligibility and thresholds: The Kleinunternehmerregelung applies if the net turnover in the previous calendar year did not exceed 22,000 euros and the projected turnover for the current year will not exceed 50,000 euros. For new businesses, the rule can apply in the first year if the turnover is not expected to exceed these limits. If these thresholds are exceeded, normal VAT rules apply.

VAT handling: Entrepreneurs who qualify do not charge VAT on their invoices and are generally not required to file regular VAT returns. They may not claim input tax (Vorsteuer) on purchases. Invoices issued under the Kleinunternehmerregelung should indicate that no VAT is charged due to the regulation, to avoid confusion.

Administrative impact: The status affects VAT obligations but not income tax or trade tax. Kleinunternehmer still maintain records and file tax returns at the income tax level; VAT returns are typically unnecessary unless the entrepreneur opts out of the regime.

Opting out: A business can voluntarily relinquish the Kleinunternehmerregelung and charge VAT, which allows deducting input tax and requires standard VAT returns (monthly or quarterly). The decision is often influenced by customer mix, growth plans, and whether clients can reclaim VAT.

Scope: The concept is most commonly associated with Germany. Similar small-business VAT regimes exist in other German-speaking countries but with different thresholds and rules.