Germany for freelancers: Kleinunternehmer VAT relief and the Freiberufler vs Gewerbe split
Two decisions shape a German freelancer's admin: whether you use the Kleinunternehmerregelung to skip VAT, and whether the Finanzamt classes you as a Freiberufler or a trade (Gewerbe). The thresholds were raised for 2025 and carry into 2026.
This article is general information, not tax advice. Regulations change — verify the current rules with the official sources below before acting.
Setting up as a freelancer in Germany comes down to two early decisions, both of which shape how much admin you carry: whether to use the Kleinunternehmerregelung, and whether you're a Freiberufler or a Gewerbe.
Kleinunternehmer: skipping VAT (with a trade-off)
The Kleinunternehmerregelung (§19 UStG) lets small businesses skip VAT. The thresholds were raised for 2025 and carry into 2026:
- Previous calendar year: total turnover at or under €25,000.
- Current calendar year: turnover at or under €100,000 — now a hard limit; the moment you cross it in-year, the exemption ends for transactions from that point.
The trade-off: you charge no VAT and remit none — but you cannot recover input VAT on your purchases. If you have heavy start-up costs, waiving the exemption can sometimes pay; if you sell mostly your own time, it usually simplifies life.
Freiberufler vs Gewerbe: the classification that matters
- Freiberufler are the liberal/"catalogue" professions under §18 EStG — many consultants, engineers, journalists, designers, IT professionals. They register only with the Finanzamt, pay no Gewerbesteuer (trade tax), aren't compulsory IHK members, and may use the simple cash-basis Einnahmenüberschussrechnung (EÜR) instead of double-entry books.
- A Gewerbe (trade) registers with the Gewerbeamt, joins the IHK, and pays Gewerbesteuer on profit above the €24,500 allowance.
The Finanzamt makes the final classification — you don't simply choose. Both types complete the Fragebogen zur steuerlichen Erfassung (tax-registration questionnaire) via ELSTER to get a Steuernummer and to elect the Kleinunternehmer status.
Filing, briefly
Everything runs through ELSTER. Kleinunternehmer generally file only an annual VAT declaration; VAT-liable freelancers file periodic advance returns (Umsatzsteuervoranmeldung) whose frequency depends on their prior-year VAT. Profit is reported via the EÜR on your annual income-tax return.
General information about freelancing in Germany, current as of the review date above, and not tax advice. Thresholds and rules change — confirm current figures with the Finanzamt, ELSTER, or a qualified adviser (Steuerberater).
Frequently asked questions
What is the Kleinunternehmerregelung threshold in Germany?
Under §19 UStG, you can use the small-business VAT exemption if your total turnover was at or under €25,000 in the previous calendar year and stays at or under €100,000 in the current year. It means you charge no VAT on invoices and remit none — but you also cannot recover input VAT on your purchases. The €100,000 is now a hard in-year limit.
What's the difference between Freiberufler and Gewerbe?
Freiberufler are the liberal/catalogue professions (§18 EStG — e.g. many consultants, engineers, journalists, designers). They register only with the Finanzamt, pay no trade tax (Gewerbesteuer), and can use simple cash-basis accounting (EÜR). A Gewerbe (trade) registers with the Gewerbeamt, joins the IHK, and pays Gewerbesteuer on profit above the €24,500 allowance. The Finanzamt makes the final call.