The procedure for company and self-employed/freelancer registration.

Small business owner: the main decision of the first year

Small business status exempts from VAT. From 2025, the rules have changed noticeably, and old descriptions on the internet are misleading.

A trap that causes people to lose money. The threshold of €100,000 is not a forecast. If it is exceeded, you fall out of the mode immediately, in the same yearfrom that turnover onwards, the threshold has been crossed and is fully subject to VAT. Turnovers up to that point remain exempt. Monitor the amount throughout the year, not just at the end.

What to include in invoices

The invoice needs to state that the small business exemption applies, and Under no circumstances should VAT be shown on a separate line — otherwise, you will have to pay the tax in question, even if you do not owe it. This also applies to small bills of up to €250.

Mandatory details: name and address of both parties, your tax number or identification number, date, quantity and type of goods or service, amount on a single line and a reference to the exemption.

Renunciation of status

You can waive the exemption if you want to deduct incoming VAT, which is advantageous for large initial purchases. You must apply by the last day of February of the second following year: for the year 2025 — by the end of February 2027. But please note: cancellation entails for a minimum of five calendar years.

From 2025, the small business scheme can also be applied in other EU countries, provided the total EU-wide turnover does not exceed €100,000. This requires a separate identification number from the Federal Central Tax Office and quarterly reporting.

Electronic bills: dates to know

Small business owners from exhibition exempt from electronic invoices — their invoices can always be sent in the usual way. But to accept They are obliged to as well. Exceptions to the general obligation include: small invoices up to €250 gross, travel tickets, many VAT-exempt turnovers, and all transactions with private individuals.

Formats considered to be electronic invoices are XRechnung and ZUGFeRD starting from version 2.0.1. A standard PDF is an electronic invoice is not.

What reports to submit and when

Warning for 2027. Exemption of new entrepreneurs from mandatory monthly According to the wording of the law, the submission of the Voranmeldung in the first two years is currently only valid until the end of 2026. If the legislature does not extend it, founders will once again be required to report monthly during their first two years from 1 January 2027. Keep an eye on the news towards the end of the year.

If income has dropped, advance payments can be reduced: submit an application for a reduction with a calculation of the expected profit. This is much better than accumulating a debt to the tax authorities.

When it comes to keeping a full set of accounts

The obligation arises with a turnover exceeding 800.000 € in the calendar year or profits exceeding 80.000 €. Important detail: it begins not automatically, but only from the beginning of the financial year following the notification to the Finanzamt. And it ends following the same logic.

This obligation never applies to freelancers regardless of turnover, they can keep simplified records of income and expenditure. Merchants entered in the trade register always keep a balance sheet.

Trade tax: how much and from what

Change for 2027: the minimum municipal rate is increased from 200 to 280 %. In local authorities with the lowest rates, the tax burden will rise from approximately 7 to 9.8 % of profit. In 2026, the previous minimum rate will still apply.

Social contributions: who is obliged to pay into the pension fund

Common misconception: «the self-employed do not pay into the pension fund». In fact, the law lists the groups for whom insurance definitely.

Trap: part-time employee for this quota That doesn't count. You won't be able to hire a minijobber to get out of the obligation.

How much to pay

If you are paying based on actual income, the tax decision must be submitted to the pension fund. no later than two months upon receipt thereof.

Künstlersozialkasse — for creative professionals

This is the best-value option for artists, musicians, designers, authors, and journalists: the insured pays half contributions as an employee, and the other half is covered by clients and the federal budget. Medical, long-term care and pension insurance are covered.

Medical insurance

When switching to self-employment, your insurance status changes – you need to inform your health insurance fund about this. In the public system, the contribution is not calculated from your actual income, but from minimum calculation basein 2026 it is €1,318.33 a month. The minimum contribution comes out to approximately €270 a month without sickness benefit and the like 278 € with him; childless people pay a bit more due to the long-term care insurance surcharge. The maximum contribution is around €1,226 a month.

Private insurance is calculated based on age and health rather than income: it is often cheaper for young and healthy people, but gets more expensive with age, and returning to the public system later can sometimes be impossible.

Bogus self-employment: the freelancer's main risk

If the tax office or the pension fund decides that you are actually an employee, the client will be retroactively assessed for all social security contributions — and this destroys the relationship with the client and often ends in the contract being terminated.

How to protect yourself

There is a free procedure for establishing status in the pension fund. The decision is binding on all other insurers, and consideration takes about three months.

Key deadline: if you apply within a month after the activity begins and the status is recognised as dependent employment, insurance will start from the date of the decision, and not retrospectively. Miss this month, and the contributions will be back-calculated for the entire period.

Since 2022, additional tools have also been available: the decision until commencement of operations, determination of status in tripartite relations, and group assessment of similar contracts. Please note: under the text of the law, the validity of these instruments is limited to 30 June 2027, and extension has not yet been confirmed.