Small-scale entrepreneur limit in 2025: New regulations for businesses in Germany

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  1. Introduction
  2. What is the small-scale entrepreneur rule?
  3. What new provisions apply to the small-scale entrepreneur rule as of 2025?
  4. What small-scale entrepreneur limit applies as of 2025?
  5. What does “internationalization of the small-scale entrepreneur rule” mean?
  6. What provisions apply to the annual VAT return as of 2025?
  7. What provisions apply to e-invoicing as of 2025?
  8. Changes small-scale entrepreneurs need to know about in 2025: A summary

As of 2025, a new small-scale entrepreneur limit applies in Germany. There are also additional changes in the law for businesses that benefit from this rule.

In this article, business owners can learn what the small-scale entrepreneur rule entails, what its new limit is, and what other changes have taken effect this year.

What’s in this article?

  • What is the small-scale entrepreneur rule?
  • What new provisions apply to the small-scale entrepreneur rule as of 2025?
  • What small-scale entrepreneur limit applies as of 2025?
  • What does “internationalization of the small-scale entrepreneur rule” mean?
  • What provisions apply to the annual VAT return as of 2025?
  • What provisions apply to e-invoicing as of 2025?
  • Changes small-scale entrepreneurs need to know about in 2025: A summary

What is the small-scale entrepreneur rule?

The small-scale entrepreneur rule relieves businesses with relatively low sales of their bureaucratic and tax obligations. In principle, businesses in Germany must charge VAT on their products and services. However, the small-scale entrepreneur rule makes certain businesses exempt from this obligation. According to Section 19 of the VAT Act (UStG), the utilization of this rule is subject to an annual turnover limit.

The small-scale entrepreneur scheme is aimed in particular at startups, micro-enterprises, and the self-employed. It is voluntary, so businesses below the turnover limit can decide for themselves whether they want to make use of the regulation. The advantage of a VAT exemption is that it simplifies administration, as no preliminary VAT returns are required. However, the right to reclaim input tax amounts from the tax authorities is also lost.

Further information on this subject can be found in our article on the small-scale entrepreneur rule.

What new provisions apply to the small-scale entrepreneur rule as of 2025?

There were changes made this year to the small-scale entrepreneur rule. The new provisions are based on the Growth Opportunities Act and the Annual Tax Act passed by the German Bundesrat in March and November of 2024, respectively. Both took effect on January 1, 2025.

As part of the Annual Tax Act:

  • Revenue limits for small-scale entrepreneurs have been adjusted.
  • The small-scale entrepreneur rule is internationalized.
  • Small-scale entrepreneurs are no longer required to issue e-invoices; however, they must still be able to receive them.

As part of the Growth Opportunities Act, small-scale entrepreneurs are no longer obligated to submit an annual VAT return every year.

What small-scale entrepreneur limit applies as of 2025?

Until the end of 2024, businesses were allowed to adopt the small-scale entrepreneur status if their annual sales fell below €22,000 in the previous calendar year and below €50,000 in the current year. In 2025, a new small-scale entrepreneur limit applies. The thresholds have been raised to €25,000 in the previous year and €100,000 in the current year. This allows more businesses to benefit from the advantages of the small-scale entrepreneur rule.

Another important change is that while the old limits were gross totals, the new values are net totals. Assuming a tax rate of 19%—the standard VAT rate in Germany— a business is now allowed to have sales up to €29,750 gross in the previous year and €119,000 gross in the current year while benefiting from the small-scale entrepreneur rule.

Additionally, the small-scale entrepreneur limit is now considered a hard limit (i.e., it is an exact threshold enforced by the tax authority). Prior to the new regulation, it was sufficient for a business to estimate its expected turnover for the current calendar year. The business also wouldn’t lose its small-scale entrepreneur status if it exceeded the limit during the year. In 2025, however, the new rule dictates that if revenue limits are exceeded in the current year, a business’s status as a small-scale entrepreneur expires immediately. The business is then required to include VAT on all subsequent invoices and pay it to the tax authority.

It’s important to note that small-scale entrepreneur status remains voluntary: businesses below the statutory revenue limits do not need to adopt the status. They can opt for standard taxation at any time.

Voluntary and mandatory use of the small-scale entrepreneur rule - This table shows when use of the small-scale entrepreneur rule is voluntary or mandatory depending on businesses’ annual sales in relation to the legal limits.

What does “internationalization of the small-scale entrepreneur rule” mean?

It is not only the small-scale entrepreneur limit that has been adjusted in 2025—another key aspect of the legislative changes is the internationalization of the small-scale entrepreneur rule.

As of January 1, 2025, businesses from other EU countries are able to benefit from the small-scale entrepreneur scheme in Germany so long as they generate most of their sales in Germany. Previously, only German businesses were able to adopt the status of small-scale entrepreneur in Germany.

Additionally, businesses in Germany are now allowed to use the small-scale entrepreneur rule in other EU countries if their revenues are below the statutory limits. This was not possible prior to 2025.

With the new regulations, the EU has created equal rights for all businesses in its member states. This harmonization promotes fair competition and facilitates small-scale entrepreneurs’ cross-border business activities. And because of these regulations, new reporting systems are being introduced. German businesses must now report their sales to the Federal Central Tax Office (BZSt). The authority, in turn, checks that the revenue limits are complied with in all EU countries. In addition, businesses can apply for a special small-scale entrepreneur identification number.

However, there are now some exceptions and special regulations that businesses must observe.

  • Intracommunity supplies: The tax-free supply of goods to other EU countries is not applicable to small-scale entrepreneurs. This means that businesses must collect VAT on these sales on a regular basis.
  • Intracommunity acquisitions: Under certain conditions, small-scale entrepreneurs need a VAT number to purchase goods from other EU countries. This is necessary in order to correctly report and record the purchases for tax purposes.

What provisions apply to the annual VAT return as of 2025?

Until now, small-scale entrepreneurs were required to file an annual VAT return each year, even though they were exempt from VAT. This was a significant administrative burden, even though they did not have to report VAT on invoices, claim input tax, or file provisional VAT returns.

In 2025, the small-scale entrepreneur rule has relieved affected businesses of this burden. Small-scale entrepreneurs are no longer required to file annual VAT returns, including so-called “zero declarations” when they’ve made no sales. The last annual VAT return that needed to be filed was for the year 2023. From the 2024 tax year onward, this obligation no longer applies to small-scale entrepreneurs.

For many small-scale entrepreneurs, this is a welcome change in the law, as the new regulation saves time and the potential costs of seeking tax advice. This should also significantly simplify the tax process, especially for self-employed individuals and micro-enterprises, which already have limited resources for administrative tasks. In addition, the change reduces the risk of errors in the preparation of annual returns, which in the past often led to inquiries or even penalties. That said, businesses must continue to carefully document their compliance with the revenue limits of the small-scale entrepreneur rule, as this remains the basis for the tax exemption.

What provisions apply to e-invoicing as of 2025?

To promote both the digitalization of businesses and tax efficiency in Germany, the Growth Opportunities Act introduced a requirement that, starting on January 1, 2025, all businesses be able to create and receive electronic invoices. The Act allows businesses to continue sending invoices in traditional formats (e.g., PDF or paper) as late as 2028, depending on their annual turnovers.

The Annual Tax Act, however, relaxed this rule in one respect: small-scale entrepreneurs can continue to send invoices in traditional formats beyond 2028, giving them more time to switch to digital systems.

It is important to note that this exception only applies to the delivery of electronic invoices. Small-scale entrepreneurs still need to be able to receive and process e-invoices from other businesses. This requires a suitable software solution or compatible system.

The “principles for the proper management and storage of books, records, and documents in electronic form” (GoBD) also continue to apply. These include, in particular, the audit-friendly archiving of invoices. All receipts—whether created digitally or on paper—must be complete, correct, and unchanged when stored. This ensures that invoices are traceable in their original form in case of an audit.

Changes small-scale entrepreneurs need to know about in 2025: A summary

As of 2025, the small-scale entrepreneur rule has brought some significant changes to applicable businesses. Here is an overview of the most important points.

  • Revenue limit change: The revenue limit for small-scale entrepreneurs has been raised from €22,000 gross in the previous year and €50,000 gross in the current year to €25,000 and €100,000 net, respectively.
  • Enforcement of the revenue limit: Small-scale entrepreneurs that exceed the revenue limit during the year must switch to standard taxation from the moment they surpass the limit. Exceeding the limit also means the business is no longer considered a small-scale entrepreneur moving forward.
  • Use of the rule in other member states: Small-scale entrepreneurs in Germany can use the small-scale entrepreneur regulation in other EU countries.
  • Use of the rule by businesses in other member states: Likewise, small-scale entrepreneurs from other EU countries can use the regulation in Germany.
  • VAT return change: Small-scale entrepreneurs are no longer required to file annual VAT returns.
  • E-invoicing change: Small-scale entrepreneurs are not required to create e-invoices, but must be able to receive them.

In many cases, the new regulations mean relief for small-scale entrepreneurs and new business opportunities. However, they also present administrative challenges, especially as businesses go global. As a result, it is important that small-scale entrepreneurs understand the new requirements early on and put in place processes to ensure proper reporting and compliance.

Stripe Tax can help here. With Tax, small-scale entrepreneurs have a clear view of all their domestic and international sales. Additionally, it is possible to collect and report taxes on worldwide payments when sales limits are exceeded—the correct amount of tax is automatically calculated. This eliminates the need for businesses to keep up with new tax regulations and rates. Businesses also have access to all relevant tax documents and can claim tax refunds quickly and easily.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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