As 2025 approaches, several potential changes to VAT regulations in Germany are on the horizon. While some measures have already been approved, others remain under discussion or in legislative uncertainty due to the challenges faced by the current government. Businesses should be aware of these developments and monitor updates to ensure compliance.
1. Adjustments to the Small Business Scheme (Kleinunternehmerregelung)
One of the most anticipated changes involves updates to the small business scheme, governed by § 19 UStG. The thresholds for eligibility are expected to be increased as follows:
- Annual turnover in the previous year: Increased from €22,000 to €25,000.
- Projected turnover in the current year: Raised from €50,000 to €100,000.
These adjustments aim to allow more small businesses to benefit from reduced administrative burdens. However, the final implementation of these changes depends on further legislative progress.
2. Mandatory E-Invoicing for Domestic B2B Transactions
A significant shift toward digitalization is expected with the introduction of mandatory electronic invoicing (e-invoicing) for business-to-business (B2B) transactions within Germany. Under the proposed rules:
- Starting January 1, 2025: Businesses must be capable of receiving and processing e-invoices.
- Issuing E-Invoices: This obligation will also apply from the same date, though businesses may continue to use paper invoices with the recipient’s consent until the end of 2026.
The framework for mandatory e-invoicing is aligned with the European Commission’s broader strategy for digital transformation and is supported by provisions in § 14 UStG. However, these measures remain under discussion, and their final form is contingent on legislative developments.
3. Changes to VAT Filing Deadlines
To reduce administrative burdens for smaller businesses, the thresholds for quarterly VAT prepayments are expected to be adjusted. Businesses with a VAT liability of up to €9,000 (previously €7,500) in the previous year will qualify for quarterly VAT filings instead of monthly filings.
This change, aligned with the goals of reducing bureaucracy, is included in broader legislative reforms but awaits final approval.
4. Internationalization of the Small Business Scheme
Proposals are being discussed to extend the German small business scheme to EU-based businesses meeting the eligibility criteria. This change would allow foreign small businesses to benefit from VAT exemptions under § 19 UStG. Conversely, German small businesses could apply for similar exemptions in other EU countries.
While this measure could streamline cross-border trade, it introduces additional requirements, including registering for a specific small business identification number and fulfilling reporting obligations. The implementation of this measure remains uncertain, pending further regulatory developments.
Current Legislative Status and Uncertainty
The legislative framework for many of these changes has not yet been finalized. The German government has faced setbacks in recent months, raising questions about whether all proposed VAT reforms will be implemented as planned. Key measures, such as the adjustments to the small business scheme and mandatory e-invoicing, are widely supported but may face delays or modifications.
Businesses are advised to remain vigilant, as any updates to VAT regulations will require timely adjustments to compliance processes and systems.
Conclusion
While 2025 promises transformative changes to VAT regulations in Germany, the uncertain political landscape means businesses must prepare for possible delays or adjustments. It is essential to stay informed about the latest developments and begin internal preparations where measures have already been approved, such as e-invoicing readiness.
For further guidance on how these potential VAT changes may impact your business, feel free to contact us at info@vat-germany.com. At WW+KN, a Baker Tilly Company, we are here to support you in navigating these changes efficiently and effectively.
