Tax return for Kleinunternehmer
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‘Kleinunternehmer’ (small business owners) must all submit a tax return. As a Kleinunternehmer, you are exempt from VAT, but you may be subject to income tax and possibly also trade tax. As a Kleinunternehmer, you must also declare these taxes correctly to the responsible tax office.
Am I a Kleinunternehmer?
The Kleinunternehmer regulation makes it easier for many self-employed people to start their own business. You are completely exempt from VAT and therefore you have less amount of work than other self-employed people. If you have a total turnover of less than €22,000 in the first year of application for self-employment and you do not expect to exceed the limit of €50,000 in the following year, you can apply for the Kleinunternehmer regulation. This is then binding for you for at least 5 years. Here you can read about whether you should use the Kleinunternehmer regulation or not.
Important: Kleinunternehmer (small business owners) and Kleingewerbetreibende (tradesperson) are not the same, although they sound similar. Kleingewerbetreibende have a small trading organisation. It is a legal form and not a VAT regulation like the Kleinunternehmer regulation.
What taxes do I have to pay as a Kleinunternehmer?
Although all small business owners are exempt from VAT, other taxes may apply. If you have registered a trade organisation, you may have to pay trade tax. However, you do not have to pay trade tax up to an exemption amount of €24,500 per year.
All self-employed people are liable to pay income tax, no matter how much they earn. The income tax return is therefore important for all Kleinunternehmer.
How much income tax do I have to pay?
Self-employed persons pay their income tax from their profit. Up to an income of €9,744 in 2021, unmarried people pay no income tax. If this limit is exceeded, a tax rate of between 14-45% applies to the exceeding amount. How high your tax rate is depends on how much you earn. If you work as an employee alongside your self-employment, your income will be added together.
Important: Whether you earn just one euro or €100,000, you must file an income tax return every year as a self-employed person.
Example 1: You have a profit of €15,000. With deduction of the tax-free amount, you only pay income tax on €5,256. According to the tax office’s calculation, you will pay approximately €1,010 in income tax (as of 2021).
Example 2: Your profit amounts to €3,000 per year. You also work as a mini-jobber for €450 per month. With €8,400 per year, you are below the limit and do not have to pay income tax. Nevertheless, you have to file a tax return.
The tax office sets tax payment plan to pay taxes in advance for all self-employed so that you don’t have to pay everything at once. The tax office assess your profits of previous years. In the tax return, the advance tax payments are deducted from your income tax to be paid. If you have paid more than necessary, you will get money back. However, if you paid less, you will have to pay back taxes.
Tip from Accountable💡: The Accountable app shows you how much tax you’re expected to pay and reminds you of your tax obligations.
How do I declare my income tax?
As a self-employed person, you have to calculate your profit yourself. Kleinunternehmer usually have it easier than other self-employed people. Most Kleinunternehmer can prepare a simple income statement (EÜR). This means that you only have to deduct your business expenses from your business income.
Example: If you have €10,000 in business income and €3,000 in expenses, your profit is €7,000. It’s that simple!
Every self-employed person must file an income tax return, regardless of whether they are a Kleinunternehmer or not. The information you need to provide in the tax return is therefore the same for all self-employed persons. For example, you can deduct a certain amount of your health insurance contributions from your income like every subject to income tax. You can find out which expenses you can deduct here.
The tax return always refers to a whole year and since 2019 the return must be submitted by July 31 of the following year. For the declaration for 2020, the deadline was exceptionally extended to October 31, 2021 due to the Covid19 pandemic. If a tax advisor helps you with the tax return, the deadline is postponed by another 7 months, which is usually until the last day of February of the year after.
As a rule, the return must be sent electronically to your tax office. You are free to choose which portal or program you use. In addition to Elster, there are softwares and apps specialised for Kleinunternehmer that make it easier for you to fill out your tax return.
Tip from Accountable💡: As a Kleinunternehmer, you can easily send your income tax return in the Accountable app! Here you can download the app for free.