Can a GmbH or UG be a Kleinunternehmer? Yes — and most guides say otherwise

Search for this and you will be told no: a GmbH or UG cannot be a Kleinunternehmer, because a company is "always liable for VAT." That is wrong, and it costs founders money.

The legal position

§ 19 UStG applies to an Unternehmer. § 2 UStG defines an Unternehmer as anyone who independently carries out a commercial or professional activity — and that includes legal persons. Nothing in either provision restricts the scheme by legal form.

A GmbH or UG that meets the turnover thresholds can be a Kleinunternehmer. So can a UG in its first year, which is where the question usually comes up. If you are still choosing between the two forms, start with UG vs GmbH.

Whether it should is a different question, and the answer is more often no than yes — but that is a commercial judgement, not a legal bar. Being told it is impossible removes a decision you are entitled to make.

How the rule actually works

There are two turnover limits, and they do different jobs. Most guides list them side by side as though they were one allowance, which is why the rule is so widely misunderstood.

€25,000 decides whether you qualify at all. It looks backwards. If your turnover last calendar year was €25,000 or less, you may be a Kleinunternehmer this year. Go over it, and you are on normal taxation for the whole of the following year — automatically, with no choice in the matter.

€100,000 is a ceiling on the year you're in. It looks at the present. Even if last year qualified you, exceeding €100,000 this year ends the scheme the moment you cross it.

So the €25,000 is the test that actually governs. The €100,000 only ever comes into play if you were already small last year — which is why most people never approach it.

Both figures are measured net, excluding VAT. Until 2024 they were gross, and the old limits were €22,000 and €50,000. If you have always been a Kleinunternehmer there was no VAT in your invoices anyway, so net and gross are the same number for you — which is why you'll still find pages insisting the figure is gross.

Your first year works differently

In the year you found the company there is no previous year to look back at. So the backwards-looking test doesn't exist, and €25,000 becomes your limit for the current year — not €100,000.

Cross €25,000 in month three and the scheme ends there, at that transaction.

And it is not reduced for a part year. Start in July and you still have the full €25,000, not half of it. The old pro-rating rule is gone. You will find pages saying otherwise; they are describing the position before 2025.

For a GmbH that expects real revenue, this is usually the point at which the scheme stops being worth considering.

Crossing €100,000 mid-year

From your second year onward, the current-year ceiling bites the instant you pass it.

The transaction that takes you over €100,000 is taxed at the normal rate — in full, not just the part above the line, and not from next year. Everything invoiced before the crossing stays exempt.

The practical shape: you invoice €40,000 to a new client, that takes you past €100,000, and that invoice needs VAT on it. Send it without and you owe the tax anyway, then have to go back to the customer for it.

Until 2024 this was a forecast made at the start of the year, and a better year than you predicted was harmless. That cushion is gone — what counts now is the actual figure.

If one large order might take you across, settle it with your Steuerberater before you invoice, not after.

What else changed in 2025

Kleinunternehmer turnover is now formally exempt (steuerbefreit) rather than "tax not levied." The practical effect is unchanged — you still cannot deduct input VAT — but the invoice requirements moved to § 34a UStDV, and the note on the invoice is now mandatory rather than merely customary.

New businesses start as Kleinunternehmer automatically. Previously you had to forecast your first-year turnover on the Fragebogen zur steuerlichen Erfassung. That forecast is gone; you simply start in the scheme if you want it.

There is now an EU-wide scheme (§ 19a UStG). A German business can claim small-business treatment in other member states, with an EU-wide ceiling of €100,000 and each country's own national limit up to €85,000, registered through the Bundeszentralamt für Steuern. Relevant if you sell across borders; irrelevant if you do not.

So should your GmbH use it?

Usually not. Three reasons, in order of how often they decide it.

No input VAT deduction. This is the big one for a company. Formation costs, notary fees, equipment, software, rent, agency invoices — you pay the VAT on all of it and cannot reclaim any. A GmbH in its first year typically has substantial input VAT and modest turnover, which is precisely the shape where the scheme costs more than it saves.

Your B2B customers do not care. Business customers reclaim the VAT you charge them, so a VAT-free invoice is worth nothing to them. The scheme only genuinely helps if you sell to consumers or to VAT-exempt customers, where your price is what they actually pay.

It signals what you would rather not signal. An invoice carrying "gemäß § 19 UStG wird keine Umsatzsteuer berechnet" tells a corporate procurement department that you turn over less than €25,000. Combined with a UG's "haftungsbeschränkt" suffix, that is not the impression most founders are trying to make.

If you are unsure, the arithmetic is straightforward: add up the input VAT you expect to pay in year one and compare it to the VAT you would have charged. If the input VAT is larger, the scheme costs you money. Our cost calculator will give you the formation side of that figure.

If you opt out

You can waive the scheme voluntarily and go to normal taxation under § 19 Abs. 3 UStG — a declaration to the tax office, in writing or through Elster, up to the last day of February of the second year following the tax period.

Waiving it also starts the ordinary VAT machinery: advance VAT returns, on the quarterly or monthly cycle your tax registration questionnaire sets. Your first twelve months covers those returns and the rest of a new company's filing calendar.

The waiver binds you for five calendar years. It is not a box to tick absent-mindedly during formation, which is exactly when people tick it.

Most GmbHs and UGs waive it, or never claim it in the first place — which is probably why so many guides have concluded, wrongly, that they cannot.

How Delegro helps

• Formation for both UG and GmbH, with the notary appointment coordinated for you
• Bookkeeping and tax after incorporation, including the VAT position and whether the scheme is worth claiming
• The filings that follow registration, on the deadlines they are actually due

Still deciding?

Work out what your formation will cost in the cost calculator, or take the company quiz if the legal form is still open.

Sources: §§ 2, 19, 19a UStG; § 34a UStDV; Jahressteuergesetz 2024; BMF-Erlass of 18 March 2025. Reform effective 1 January 2025. Figures current as of August 2026.