If you run a small business alongside your studies or early career, you probably know the small business rule as a simple relief. Once the turnover limit is exceeded, however, the VAT duty changes abruptly. This guide explains when regular taxation applies, what changes on your invoices and which steps you should take straight away.
Short answer: The exemption under § 19 paragraph 1 UStG applies only if total turnover in the previous year did not exceed 25,000 euros and does not exceed 100,000 euros in the current year. On when liability starts once the 100,000 euro limit is crossed, the Lexware tax portal (status 25 August 2026) states that it starts from the turnover that crosses the limit. That is a statement by a specialist portal and not an official ruling, so clarify the application in your case with the tax office. Last updated: November 2026.
The most important points at a glance
- Exceeding the previous-year limit of 25,000 euros affects the following year, which is then taxed under the regular rules.
- According to Lexware (status 25 August 2026), exceeding the current-year limit of 100,000 euros applies immediately, from the turnover that crosses it.
- From that point on, you show VAT on your invoices and pay it over to the tax office.
- Once regular taxation applies, you can generally claim input VAT on purchases, provided the conditions are met.
- Report the change to the tax office and apply for a VAT identification number if you do not have one yet.
Which limits does the law set?
Under § 19 paragraph 1 of the German VAT act (Umsatzsteuergesetz, UStG), a turnover is exempt if total turnover in the previous calendar year did not exceed 25,000 euros and does not exceed 100,000 euros in the current calendar year. Both limits apply side by side. If either one is breached, the exemption no longer applies.
Under § 19 paragraph 2 UStG, total turnover is determined by the payments received. You therefore need to record your sales correctly, because not every payment into your account is automatically a taxable turnover. Clean bookkeeping from the start prevents surprises at year end.
When exactly does regular taxation apply?
| Situation | Consequence | Basis |
|---|---|---|
| Previous-year turnover above 25,000 euros | Regular taxation in the following year | § 19 para. 1 UStG |
| Current-year turnover above 100,000 euros | Regular taxation from the turnover that crosses the limit | Lexware tax portal (25 August 2026) |
| Both limits respected | Exemption continues | § 19 para. 1 UStG |
With the previous-year limit, the change follows a fixed calendar logic, because it affects the next year. With the current-year limit, the trigger is the turnover itself. According to the Lexware tax portal, the first turnover that crosses the 100,000 euro limit is already subject to regular taxation. No change of month is required.
A worked example of the change
Assumption: your shop earns a net turnover of 30,000 euros in 2026. Then regular taxation applies in 2027, because the previous-year limit has been exceeded. Assumption: in 2027 you reach 85,000 euros in September and a further 20,000 euros in October. The October turnover crosses the 100,000 euro limit, so, according to Lexware, regular taxation applies from that sale onwards, while the earlier sales remain under the exemption.
The example shows why you should not wait until the end of the year. Check your running turnover every month, so that you can prepare the change in time.
What changes on your invoices?
From the change onwards, invoices must no longer carry the small business note. Instead, you must show VAT where the supply is taxable. This applies to offers, invoices to business customers and receipts from your shop alike. Review your templates, because faulty invoices lead to queries from the tax office.
Input VAT on purchases, for example packaging material, software or shipping services, can generally be claimed after the change. For that you need proper supplier invoices that show the tax separately. Keep receipts from the period before the change carefully as well.
Which steps are necessary now?
The change starts with a notification to the tax office. Lexware recommends registering the tax liability and applying for a VAT identification number. The tax office then sets the rhythm of the VAT advance returns, for example monthly or quarterly. The source does not name a fixed deadline for the registration, so contact the tax office promptly.
In parallel, review your prices. If you now show VAT, you must either calculate with net prices or adjust your gross prices. A price comparison before the change prevents customers from being surprised.
Why the threshold matters for students
Many students start with a small amount of income and only later notice that sales have grown. The limit is easy to overlook when orders come in through several platforms at once, because each platform shows its own totals. Add up all sales channels in one place, for example in a simple spreadsheet, so that you see the running turnover of the year at a glance.
The threshold also matters for planning. If a larger customer order would push you past 100,000 euros, you can decide in advance whether to accept it and how to price it. A short conversation with a tax adviser before such an order avoids a rushed change of invoicing in the middle of the year.
Frequently asked questions
Can I become a small business again after exceeding the limit?
Yes, if you respect both limits again in a following year. The turnover of the previous year then decides on the exemption. Whether a return to the exemption makes sense depends on your business and should be discussed with the tax office or a tax adviser.
Do I have to pay VAT retroactively if I exceed the limit?
That depends on when you report the change and which invoices you issued so far. Anyone who billed without tax by mistake should inform the tax office promptly and clarify the facts. Professional advice helps you assess the consequences correctly.
Does the limit also apply in the founding year?
The limits in the statute apply to each calendar year. How a founding year affects you in an individual case should be asked at a founder advice centre or at the tax office, because the application depends on your specific situation.
Do I have to calculate VAT myself after the change?
Yes, the tax is calculated from the net amount and shown separately on the invoice. Accounting software can do the calculation for you, but responsibility for correct invoices remains with you.
What to do next
- Calculate your turnover of the previous year and your running turnover, each net.
- Register the tax liability with the tax office and, where needed, apply for a VAT identification number.
- Adjust invoice templates and prices before the next taxable invoice goes out.
- Set up a monthly check of your turnover, so the limit is not passed unnoticed.
Related reading
- Small business rule 2025: new 25,000 euro limit for the previous year (in German)
- Online shop while studying: costs, registration and obligations (in German)
- Side job and self-employment in parallel: what students should note (in German)
- Self-employed while studying: trade, tax and health insurance (in German)
- Founding while studying: funding programmes and advice at a glance (in German)
Sources: § 19 UStG, text of the law (accessed 2 November 2026, German) | Lexware Office help centre: turnover limit for small businesses (25 August 2026, German) | § 19 UStG, mirror at lxgesetze.de (German)
Last updated: November 2026. This guide is general information, not individual advice.
