If you are freelancing in Germany and your revenue is modest, you may be able to skip charging VAT. The rule is called the Kleinunternehmerregelung — the small business exemption under §19 UStG. When it applies, you do not collect VAT from your clients, you do not file VAT returns, and your invoices are simpler. The trade-off: you cannot reclaim VAT on your own business expenses.
You have probably heard stories about freelancers who used the Kleinunternehmer exemption and later had problems — sometimes owing VAT they never collected, sometimes discovering they were never eligible in the first place. Those stories are real. The exemption is useful, but it comes with rules. If you get them wrong, you may end up paying VAT out of your own pocket.
This article explains what the rules actually are after the 2025 changes, what can go wrong, and how to stay on the right side of them.
Short answer
You may qualify as a Kleinunternehmer if your revenue was €25,000 or less in the previous calendar year and you do not expect to exceed €100,000 in the current year. If both conditions hold, you do not charge VAT — but your invoice must include a specific note explaining why there is no VAT on it.
What changed in 2025
The thresholds were raised significantly on 1 January 2025:
| Threshold | Before 2025 | From 2025 onwards |
|---|---|---|
| Prior year revenue | €22,000 | €25,000 |
| Current year revenue | €50,000 | €100,000 |
Two other changes matter:
New businesses start as Kleinunternehmer by default. Before 2025, you had to actively opt in. Now the exemption applies automatically unless you opt out (by ticking the box on your Fragebogen zur steuerlichen Erfassung to charge regular VAT).
The €100,000 limit is now a hard cap, not a forecast. If you cross €100,000 during the year, you switch to regular VAT taxation immediately — from that invoice onwards. Revenue you earned before crossing the threshold stays VAT-exempt. This is a change from the old rule, where the €50,000 limit was based on your projection at the start of the year.
These thresholds apply for 2025, 2026, 2027, and beyond — there is no further phase-in scheduled.
What happens if you exceed the limit
This is where people get tripped up. There are two scenarios:
You exceeded €25,000 last year
You lose Kleinunternehmer status for the entire current year. From 1 January, every invoice you issue must include VAT. You must register for regular VAT, file Umsatzsteuervoranmeldungen (VAT returns), and charge 19% (or 7% for reduced-rate services) on all invoices.
You exceed €100,000 during the current year
You lose Kleinunternehmer status mid-year, starting with the invoice that pushes you over €100,000. Everything before that point stays VAT-exempt. Everything after it must include VAT.
Example: You invoice €95,000 by October, then land a €10,000 project in November. The November invoice crosses the threshold — so that invoice (and all future ones) must include VAT. The €95,000 you invoiced earlier in the year remains VAT-free.
The consequence in both cases: You must contact your Finanzamt, switch to regular VAT, and update your invoicing. If you accidentally issue a VAT-free invoice after losing the exemption, you may still owe the VAT to the tax office — even though you did not collect it from your client.
The invoice requirement
Every Kleinunternehmer invoice must include a note explaining why there is no VAT. The standard wording is:
Gemäß §19 UStG wird keine Umsatzsteuer berechnet.
In English: "No VAT is charged pursuant to §19 UStG."
This note is mandatory. Without it, your client (or their accountant, or a tax auditor) has no way of knowing whether you forgot the VAT or whether you are legitimately exempt. Some freelancers add a brief English translation for international clients, but the German text is the legally required part.
You still need all the other standard invoice fields — your name and address, your client's name and address, the invoice date, a unique invoice number, a description of the service, and your Steuernummer or USt-IdNr.
Invoicing clients outside Germany
Kleinunternehmer status applies to German VAT — it does not automatically tell you what to do when your client is in another country.
If your client is a business in another EU country, the situation gets more complex. Reverse charge rules may apply, and the interaction between §19 UStG and EU cross-border invoicing has edge cases that are easy to get wrong. If you regularly invoice EU clients, it is worth reading up on reverse charge separately or asking your Steuerberater how to handle it.
For clients outside the EU (US, UK, Switzerland), VAT generally does not apply regardless of your Kleinunternehmer status — but you still include the §19 note on your invoice.
Official wording
"Der Unternehmer kann die Steuer nach den allgemeinen Vorschriften berechnen, wenn er dies dem Finanzamt erklärt. […] Der Umsatz im vorangegangenen Kalenderjahr darf 25.000 Euro nicht überstiegen haben und der Umsatz im laufenden Kalenderjahr darf 100.000 Euro voraussichtlich nicht übersteigen."
— §19 (1) UStG (as amended from 1 January 2025)
In plain English: you can opt out and charge regular VAT if you want to, but if you stay in, your prior-year revenue must not exceed €25,000 and your current-year revenue must not exceed €100,000.
What this means for you
If you are just starting out or your freelance income is a side project, the Kleinunternehmer exemption can keep things simpler — no VAT returns, no VAT accounting. The raised thresholds from 2025 give you more headroom than before.
The main thing to watch: the €100,000 current-year cap is now a hard limit. If a big project pushes you over mid-year, you switch to regular VAT immediately. Keep a running total of your invoiced revenue so you are not caught off guard.
And if you do use the exemption, include the §19 note on every invoice. It is a single sentence, and it saves you from awkward questions later.