Switching from Kleinunternehmer to standard VAT: you will wait a long time for a letter from the tax office

Nobody contacts you. If you drop out of the Kleinunternehmer scheme (the German small business VAT scheme) or leave it voluntarily, there is no letter from the tax office that triggers the switch. From that moment three things are on you, and all three without being asked: you report yourself, you file the VAT return yourself, and you transfer the tax to the tax office yourself. You will not receive an invoice or a payment request for it – you calculate the amount yourself and pay it on the same date the return is due: by the tenth day after the end of the period, in your first year almost always quarterly. A tax adviser only takes this over if you hire them for it; the obligation still stays with you. On top of that you have to make one decision actively: cash accounting or accrual accounting. Cash accounting protects your liquidity, but it does not happen by itself – you have to apply for it.

This article provides general information and is not tax advice. If you have doubts about your specific case, ask your tax adviser or your tax office.

Contents

1. Do I have to report to the tax office – or does it happen automatically?
2. Will I get a letter when I have to switch?
3. From when does standard VAT apply to me?
4. The VAT return: who files it, how often, by when
5. Accrual or cash – the decision nobody makes for you
6. I noticed too late – what now?
7. Doesn't my tax adviser do this?
8. What happens to the invoices from your Kleinunternehmer period
9. What you now get back: input VAT
10. Back to Kleinunternehmer: five years at the earliest
11. What to change in your invoicing software
12. The process in five steps

Do I have to report to the tax office – or does it happen automatically?

You have to act yourself. But there is no separate notification form and no document titled „I am now subject to standard VAT". Your notification is the first VAT return (Umsatzsteuer-Voranmeldung) you file.

That sounds casual, but it is the heart of the matter: the tax office does not track your turnover continuously. It sees it afterwards – in your tax return, in your VAT return. As long as you file nothing, nobody there is watching your figures and raising an alarm.

Two cases do need an explicit message:

• You leave voluntarily even though you stay below the thresholds. Then you have to declare the waiver to the tax office (§ 19 para. 3 UStG). An informal message via your ELSTER account is enough.
• You need a VAT identification number because you sell to companies in other EU countries. You apply for that separately. How the ELSTER route works is described in applying for a German tax number via ELSTER.

Will I get a letter when I have to switch?

Do not count on it. A letter telling you „standard VAT applies from today" is not part of the procedure.

You do get post elsewhere: the tax office determines the rhythm in which you file returns and informs you about it. But that message only arrives after you have become visible – that is, after you have reported or filed your first return. It is the answer, not the trigger.

Post also arrives when something is missing. Anyone who files a return late can receive a late filing penalty; if nothing arrives at all, the tax office estimates the amounts. Exactly this order makes waiting expensive: the first letter is then a demand, not a reminder. How harsh missed deadlines can get is described for the annual tax return in tax return deadline missed.

From when does standard VAT apply to me?

You stay a Kleinunternehmer as long as both limits hold: your turnover in the previous year was at most €25,000, and in the current year it stays below €100,000. If either breaks, the status ends – but at different points in time. Find your case before you write the next invoice.

This always means turnover, not profit: everything you took in, without deducting your costs.

The second case is the unpleasant one, because it strikes in the middle of the year and your invoices look different from one day to the next. What happens in detail – including with prepayments and partial services – is described in the article on the pitfalls of the Kleinunternehmer scheme.

In the third case the deadline is worth a look: you can still declare the waiver until the last day of February of the second year after the year concerned (§ 19 para. 3 UStG). For the year 2026 you therefore have until the end of February 2028.

Careful, this is not a free option. If you declare the waiver retroactively, all turnover of that year becomes taxable – including the invoices you were paid for long ago. You then have to extract the VAT from the amounts already received and pay it over. Business customers usually pay the difference afterwards because they reclaim it as input VAT. Private customers generally do not – there the tax stays with you. A retroactive waiver therefore only pays off if your input VAT from investments is higher than the tax you have to pay. That is a calculation to do beforehand, ideally with your tax adviser. Whether the step is worth it in principle is worked through in Kleinunternehmer – yes or no?.

A word on terminology, because these keep getting mixed up: your Kleingewerbe stays a Kleingewerbe. That is the legal form of your business and does not change because of VAT. What ends is your status as a Kleinunternehmer – purely a VAT question. Why these are two separate levels is explained in the difference between Kleingewerbe and Kleinunternehmer.

The VAT return: who files it, how often, by when

The Umsatzsteuer-Voranmeldung is a short report to the tax office in which you compare two figures: the VAT you charged your customers, and the input VAT – that is the VAT you paid yourself when buying. You transfer the difference to the tax office; in official German this transfer is called a Vorauszahlung (advance payment). If the input VAT is higher, you get money back.

You make this report yourself, electronically via ELSTER.

How often depends on your VAT from the previous year:

The last row is a discretionary rule: the tax office decides, you have no entitlement to it.

For you as a fresh switcher this is good news: in your first year of standard VAT there was no VAT at all in the previous year, because you were a Kleinunternehmer. That normally puts you on the quarterly rhythm, not the monthly one. In addition, the stricter monthly obligation for newly founded businesses is suspended for the years 2021 to 2026.

By when: by the tenth day after the end of the period. For the first quarter therefore by 10 April.

And the payment? You make that yourself too, on the same day. This is where many people misjudge the situation: the tax office does not send you an invoice or a payment request for the amount. You calculate it in the VAT return, and you transfer it – filing and payment fall on the same date. Anyone who only files and does not pay has filed, but is in arrears.

If you do not want to keep this in mind every quarter, you can give the tax office a SEPA direct debit mandate. The amount you declared yourself is then collected. That does not take the filing off your hands, only the transfer.

Ten days are tight if you still have to sort the receipts of the quarter. That is what the Dauerfristverlängerung (permanent deadline extension) is for: on application, the tax office moves the deadline by a full month. The decisive point for you: a special advance payment – one eleventh of the previous year's advance payments, a kind of deposit – is only required from businesses that file monthly. As a quarterly filer you get the extra month without depositing money.

Accrual or cash – the decision nobody makes for you

This is the question most often overlooked when switching. It decides when your money is gone.

• Soll-Versteuerung (accrual basis, in the law: based on agreed consideration) is the normal case. You owe the VAT as soon as you have performed and written the invoice – regardless of whether the customer has paid.
• Ist-Versteuerung (cash basis, based on consideration received) turns that around. You owe the VAT only once the money is in your account.

An example shows the difference. On 20 March you write an invoice for €10,000 net, that is €1,900 VAT. Your customer only pays in July.

Accrual basis:  The €1,900 belong in the return for Q1.
                Due on 10 April – three months before the customer pays.
                You advance the money.

Cash basis:     The €1,900 belong in the return for Q3.
                Due on 10 October – after the money has arrived.

For most small businesses cash accounting is therefore the more sensible choice. But it is not a checkbox you tick yourself: the tax office has to permit it on application (§ 20 UStG). An informal application via ELSTER is enough.

You may apply for it if your total turnover in the previous year was at most €800,000. Total turnover here again means everything that came in, not your profit. Anyone practising a liberal profession – doctors, lawyers, architects or journalists, for example – may apply for it for that activity regardless of the limit.

An honest footnote: cash accounting only shifts the timing, not the amount. You are not given anything. What you gain is room on your account – and that is worth a lot with long payment terms.

I noticed too late – what now?

The most common case in practice: in autumn you realise that you already slipped over the limit in spring. In between there are invoices without VAT and missing VAT returns. That can be cleaned up, but not ignored.

Three things then need to be sorted out:

1. You owe the tax anyway. Whether or not you showed the VAT on the invoice makes no difference. You can correct the affected invoices and claim the tax amount afterwards. Business customers usually pay up, because they reclaim the amount as input VAT. With private customers the claim is difficult – then the tax stays with you and reduces your margin retroactively.
2. You file the missing returns, one for each affected period. A late filing penalty is possible, but it grows over time. Filing late early is always cheaper than waiting.
3. You collect your input VAT at the same time. For the same periods you may deduct the VAT from your purchases. That reduces the amount due, sometimes considerably.

Go through this case with your tax adviser before you send out corrected invoices. The order – first calculate, then correct, then file – saves you doing the work twice.

Doesn't my tax adviser do this?

Only if you hire them, and only to the extent you agreed. Making sure the VAT return reaches the tax office on time and correctly remains your obligation.

Three arrangements are common in practice:

• You do everything yourself. Realistic if your bookkeeping is manageable and your software calculates the figures. You enter them in ELSTER and transfer the money.
• The firm files the returns, you supply the receipts. The most common route. The schedule then matters: the firm needs your documents well before the tenth. What belongs in them is described in preparatory bookkeeping.
• The firm only does the annual accounts. Then the returns during the year are your business. Clarify this explicitly instead of assuming it – this is where most misunderstandings arise.

Talk to your firm before the switch takes effect. The date on which cash accounting is applied for cannot be moved around freely afterwards.

What happens to the invoices from your Kleinunternehmer period

Nothing. Invoices you wrote as a Kleinunternehmer without VAT stay as they are. You do not have to tax them retroactively and do not have to correct any invoice.

Two things change immediately for everything created from the effective date onwards:

1. The reference to § 19 UStG has to go. It is no longer true and contradicts the VAT amount shown. What the old invoice looked like is shown in writing an invoice without VAT.
2. VAT rate and VAT amount have to be on it. Both are mandatory details. If they are missing, your business customer cannot deduct the input VAT from your invoice – and will get in touch.

Watch out for the opposite mistake: anyone who shows VAT without owing it owes it anyway (§ 14c UStG). That hits you, for example, if you set the effective date too early and reissue an invoice from the Kleinunternehmer period with VAT.

What you now get back: input VAT

This is the side of the switch that rarely gets discussed. As a Kleinunternehmer you were not allowed to deduct the VAT from your purchases – it was simply part of the price for you. From standard VAT onwards you get that share back.

Concretely: you buy material for €1,190 gross. That contains €190 VAT. You enter it in your VAT return as input VAT and offset it against your own VAT. Your purchases effectively become cheaper by that share.

For this to work you need proper incoming invoices with VAT shown, and you have to keep them in order. How that works without a pile of paper is described in managing incoming invoices.

And what about purchases from before? For larger assets that you bought while still a Kleinunternehmer and continue to use, part of the input VAT that was not deductible back then may come into consideration retroactively. The transition to standard VAT counts as a change in circumstances within the meaning of § 15a UStG. The adjustment period is five years, ten years for land and buildings.

Two de minimis limits slow this down, though: the adjustment does not apply if the input VAT on the purchase does not exceed €1,000, or if the relevant circumstances have changed by less than ten percentage points. So it is not worth it for the laptop, but it can pay off for the van or the machine. Go through this point with your tax adviser – the calculation depends on the individual case.

Back to Kleinunternehmer: five years at the earliest

If you waived the scheme voluntarily, that binds you for at least five calendar years. After that you can revoke the waiver, with effect from the beginning of a following calendar year – not in the middle of the year.

If, on the other hand, you are only on standard VAT because your turnover exceeded the limit, this lock does not exist. If your turnover falls back below the values, you can use the Kleinunternehmer scheme again. That is the most important practical difference between „I slipped out" and „I stepped out" – and a good reason not to declare a voluntary waiver casually.

What to change in your invoicing software

The switch is not just a matter between you and the tax office. Your software has to calculate differently from the effective date, otherwise you keep writing invoices in the old mode.

Three points have to be changed:

• The status itself, so that the VAT rate and VAT amount appear and the § 19 note disappears.
• The effective date from which the new setting applies. Invoices before it must not change retroactively.
• The taxation method, cash or accrual – it determines the period in which a transaction lands in your reports.

In Easy Invoice at office1.cloud you change both in the settings: Kleinunternehmer or standard VAT, cash or accrual. For both switches you choose the effective date – start of next year, start of the current year, or a date of your own – and see a list of the documents that would be affected beforehand. If a five-year lock from a voluntary waiver is still running, the software blocks the return to Kleinunternehmer status and names the date from which it is possible again. It presents the figures for your VAT return in the layout of the official form with the corresponding code numbers, monthly or quarterly.

Two things it deliberately does not do, so that you do not expect it wrongly: it transmits nothing to ELSTER – you or your firm file the return. And it does not automatically repost documents that have already been recorded if you move an effective date retroactively. Both stay with you and your tax adviser, because an incorrectly set taxation method leads to a corrected filing.

The process in five steps

1. Determine the effective date. Previous year above €25,000 means 1 January. Current year above €100,000 means: from the invoice that breaks the limit.
2. Apply for cash accounting if it suits you. Informally via ELSTER, ideally before the effective date.
3. Change your invoicing software – status, effective date, taxation method.
4. File the first VAT return, by the tenth day after the end of the quarter. If it gets tight, apply for the deadline extension beforehand.
5. Do not forget the payment. It is due on the same day as the filing.

If you forget everything else, remember this sentence: the trigger comes from you, not from the tax office. Anyone waiting for a letter is waiting for the wrong one – and eventually gets one they did not want.

Status: 25 August 2026.

Sources

• § 19 UStG – Taxation of small businesses (gesetze-im-internet.de)
• § 18 UStG – Taxation procedure and VAT return (gesetze-im-internet.de)
• § 20 UStG – Calculating tax on consideration received (gesetze-im-internet.de)
• § 15a UStG – Adjustment of input VAT deduction (gesetze-im-internet.de)
• § 44 UStDV – Simplifications for adjusting input VAT (gesetze-im-internet.de)
• § 46 UStDV – Permanent deadline extension (gesetze-im-internet.de)
• § 47 UStDV – Special advance payment (gesetze-im-internet.de)