The German Ministry of Finance has updated its guidance on special VAT rules for small businesses on 18 March 2025.

These changes follow the approval, in December 2024, of the increase in VAT exemption thresholds to take effect from 1 January 2025. Previously, businesses with annual revenue below EUR 22,000 in the previous year and EUR 50,000 in the current year qualified for exemption. From 2025, these limits will rise to EUR 25,000 and EUR 100,000, respectively

The guidance also includes rules for the EU small business scheme, introduced under Council Directive (EU) 2020/285. Under this scheme, businesses based in another EU Member State can qualify for Germany’s VAT exemption if their annual turnover in Germany is within the German limits and their total EU turnover does not exceed EUR 100,000. Likewise, German businesses can apply for similar exemptions in other EU countries under the same scheme.

Additionally, small businesses in Germany that are exempt from VAT will now be allowed to issue simplified invoices. These invoices do not have to be electronic, but businesses may still issue digital invoices if the recipient agrees.

The guidance clarifies that small businesses benefiting from VAT exemption cannot claim VAT deductions on purchases related to their exempt sales.

Earlier, Germany’s Annual Tax Act 2024 (Jahressteuergesetz 2024), which introduced several tax amendments, including revised VAT exemption thresholds aimed at supporting small businesses among other provisions, entered into force on 6 December 2024 following its publication in the Official Gazette (BGBl. I 387/2024) on 5 December 2024.