Small business owners 2025: All new tax advantages at a glance!

Small business owners 2025: All new tax advantages at a glance!

The regulations for small businesses in Germany are facing important changes that will come into force on January 1, 2025. Small business owners, who are generally self-employed with low sales, benefit from tax simplifications. T-Online reports that the small business regulation allows these entrepreneurs to sell without paying VAT. The turnover limits for the small business regulation have been adjusted: From 2025, anyone who did not achieve a turnover of more than 25,000 euros in the previous year and does not exceed 100,000 euros in the current year will be considered a small business owner.

New founders often start out as small businesses and have the option of foregoing regular taxation. However, this is subject to a time limit and is valid for five years. According to Section 19 of the Sales Tax Act, small businesses are exempt from paying sales tax to the tax office and from making monthly advance sales tax returns. A sales tax return at the end of the year is not necessary, which significantly reduces the administrative effort.

New regulations and their effects

A new version of Section 19 Paragraph 1 UStG brings with it several changes. From 2025, small businesses will have the right to deduct input tax, which represents a significant simplification. If sales tax is accidentally shown on invoices, Section 14c (1) UStG applies. It is important to note that domestic small businesses must take the new regulations into account, in particular Sections 19 Paragraphs 1, 2, 3 and 6 UStG-E, in order to also use the tax exemption in other EU member states.

By raising the lower limit from 22,500 euros to 25,000 euros, what counts as a small business owner is now more clearly defined. Another relevant provision states that the small business regulation is excluded in the following year as soon as the sales target is exceeded in the current year. However, for entrepreneurs who exceed 25,000 euros in the current year, there is the option of maintaining the regulation up to a maximum of 100,000 euros in the year of excess.

Other tax aspects

It should be noted that the tax exemption only applies to taxable transactions according to Section 1 Paragraph 1 No. 1 UStG. Small businesses are still obliged to account for sales tax on intra-community purchases and to pay import sales tax, although they are not entitled to input tax deduction. This regulation will change from January 1, 2025, as the exception for small businesses in Section 1a Paragraph 3 No. 1 Letter b UStG will be repealed. Every intra-community acquisition is then taxed unless the tax exemption is waived.

Overall, the adjustments show that small businesses in Germany continue to benefit from tax simplifications, but have to adapt to new regulations. Taxes are due if the taxable income exceeds the exemption amount. Small business owners can deduct operating expenses as well as costs for their professional and private insurance from their profits, which also offers important financial flexibility.

Further details and specific aspects of the new regulations can be found on the website T Online and Haufe available.