Germany Updates VAT Rules for Small Businesses to Reflect EU Directive 2020/285
On March 18, 2025, Germany’s Ministry of Finance introduced new provisions for small businesses, aligning national regulations with EU Directive 2020/285. These changes are reflected in amendments to the German VAT Act (Umsatzsteuergesetz) and the Annual Tax Act 2024 (Jahressteuergesetz 2024) and have been in effect since January 1, 2025.
Cross-Border VAT Exemptions
Under the updated regulations, small businesses in Germany can now apply for tax exemption on sales within other EU Member States. To do so, they must participate in the special reporting procedure outlined in Section 19a of the UStG, overseen by the Federal Central Tax Office (BZSt).
Entrepreneurs based in other EU countries may also qualify for VAT exemptions under Section 19 of the German VAT Act for services rendered within Germany, as long as they meet the requirements set out in the regulation.
Adjusted Revenue Thresholds for Exemption Status
The turnover thresholds for qualifying as a VAT-exempt small business have been raised. A business now qualifies if its revenue did not exceed EUR 25,000 in the previous fiscal year and is expected to remain below EUR 100,000 in the current year.
Notably, the right to waive the exemption remains unchanged. Small businesses may voluntarily opt out of the VAT exemption and participate in the VAT system on the same terms as bigger companies.
There’s more you should know about e-invoicing in Germany – learn more about the new and upcoming regulations.
