The year 2025 brings with it numerous legal changes that are of great importance for start-ups, the self-employed and entrepreneurs. In addition to adjustments to tax thresholds, digitalization and new obligations such as e-invoicing, the focus will also be on changes to international trade and VAT. These reforms require timely preparation in order to avoid risks and make the most of the new regulations. This article presents the most important changes in detail, supplemented by practical tips for implementation. More information on portals, functions and support programs that are likely to be introduced in 2025 can be found in this post (Part 1), this post (Part 2), this post (Part 3) and most recently here (Part 4).
New turnover limits for the small business regulation
From January 1, 2025, the small business regulation in accordance with Section 19 UStG will be fundamentally reformed. The turnover limit for the previous year will be raised from 22,000 euros to 25,000 euros net, while the limit for the current year will be doubled to 100,000 euros net (previously: 50,000 euros). Another new feature is that from 2025, only net turnover will be used instead of gross turnover, which will make the calculation more transparent and simpler. These changes offer small businesses and start-ups in particular more flexibility, as they can benefit from the advantages of the small business regulation for longer. At the same time, the previous transitional regulation will no longer apply: as soon as the limit of 100,000 euros is exceeded in the current year, the standard taxation will automatically apply from this point onwards – without retroactive effect for the entire year. The reform also creates a new option to extend the small business regulation to cross-border sales within the EU (Section 19a UStG). Companies can make use of this regulation if their total turnover within the EU remains below EUR 100,000 and they register with the Federal Central Tax Office (BZSt). This is particularly relevant for start-ups that operate internationally or provide services to customers in other EU countries. The new regulation harmonizes German tax law with EU requirements and makes cross-border business considerably easier. Nevertheless, entrepreneurs should monitor their turnover closely to avoid slipping into standard taxation unprepared.
Practical tip:
Use accounting software or digital tools to closely monitor your turnover and be prepared in good time for a switch to standard taxation. You should check whether you can benefit from the new EU-wide small business regulation, especially for cross-border activities. Make sure that your invoices comply with the new requirements and do not show VAT if you continue to operate as a small business. You should also plan possible investments in such a way that they can be used optimally for tax purposes – for example by switching to standard taxation for high input tax amounts.
Tax exemption instead of not charging VAT
Another important change concerns the legal status of the small business regulation: from 2025, sales by small businesses will be expressly considered “VAT-exempt”. Previously, it was only stipulated that no VAT would be charged – a difference that primarily has legal and technical implications. This clarification harmonizes German law with the requirements of EU Directive (EU) 2020/285 and creates more legal certainty for entrepreneurs and tax authorities. At the same time, it remains the case that small businesses cannot claim input tax and must continue to issue their invoices without showing VAT. The new wording better protects small businesses from misunderstandings in international transactions or audits by tax authorities. For cross-border activities within the EU in particular, this change provides more clarity on how sales must be treated for tax purposes. Nevertheless, it remains important to issue invoices correctly – a breach of these requirements can result in erroneously reported VAT having to be paid to the tax office.
Practical tip:
Review your invoicing processes and ensure that all documents comply with the new requirements – especially for cross-border transactions within the EU. Use professional accounting software or get support from a tax consultant to avoid mistakes. If you are planning to waive the small business regulation in the future (e.g. due to high input tax amounts), you should discuss this with your tax advisor at an early stage and make strategic preparations.
Introduction of the e-invoicing obligation
From January 1, 2025, electronic invoicing (e-invoicing) will become mandatory in Germany – but initially only for the receipt of invoices in the B2B sector (business-to-business). Companies must ensure that they can receive invoices in a structured electronic format such as ZUGFeRD or XRechnung. The obligation to issue such invoices will be introduced gradually by the end of 2027, giving companies sufficient time to adapt their processes. An e-invoice is a digital document in XML format that is machine-readable and enables automated processing. In contrast to PDF files or paper documents, an e-invoice contains structured data fields that can be imported directly into accounting software – this saves time and reduces errors during processing. Even if this innovation initially only affects receipt, companies should already check their systems for compatibility.
What do companies need to do?
- Implement a software solution for processing e-invoices.
- Train your employees to use the new formats.
- Check existing IT systems for compatibility with legal requirements.
- Make sure that your business partners are also able to create or receive e-invoices.
Companies with only private customers or small businesses without VAT should also ensure that they can receive e-invoices – this could also become relevant for public tenders in the future.
Practical tip:
Even if small businesses are not obliged to issue e-invoices, they should still be able to receive and process such invoices. Invest in modern accounting software or cloud solutions at an early stage to make your processes more efficient and prepare for future requirements.
Electronic tax audit to be expanded
The electronic tax audit (euBP), which has applied to payroll data since 2023, will be extended to financial accounting data from January 1, 2025. In future, companies will have to transmit this data digitally to the pension insurance institutions – a further step towards the digitalization and automation of audit processes by the authorities. Digital transmission ensures greater efficiency and transparency during tax audits and significantly reduces the manual workload for both companies and auditors. At the same time, however, it increases the pressure on companies to adapt their accounting software to the new requirements and ensure that all data is recorded correctly.
What advantages does this offer?
The new regulation enables a faster review of company data and minimizes the risk of errors or misunderstandings during a tax audit. At the same time, it creates more legal certainty for entrepreneurs through standardized processes and clear guidelines for data transmission.
Practical tip:
Check at an early stage whether your accounting software meets the legal requirements or consider switching to a modern system. If necessary, seek advice from an IT expert to ensure that your systems are fully compatible and that all relevant data can be transferred correctly.
Relief for advance VAT returns
There will also be significant relief in the area of VAT: from 2025, advance VAT returns will only have to be submitted quarterly if the amount payable in the previous year did not exceed EUR 9,000 (previously: EUR 7,500). Companies with a payment burden of up to EUR 2,000 can even be completely exempt from the obligation to submit the return – this mainly affects smaller companies with low turnover. This change significantly reduces the administrative burden and gives entrepreneurs more time for their day-to-day business rather than for tax formalities. Nevertheless, it remains important to document turnover accurately and ensure that all tax obligations are fulfilled on time.
Practical tip:
Check your payment burden from the previous year and make sure that your accounting processes are adapted to the new deadlines. Use digital tools or tax consultant services to optimize your tax planning. Corrected text with extended paragraphs!
New non-cash benefits for meals and accommodation
From January 1, 2025, the non-cash benefit values for meals and accommodation, which must be taken into account as a non-cash benefit in payroll accounting, will change. These values will be adjusted annually to take account of inflation and the increased cost of living. For 2025, the monthly values will increase as follows:
- Meals: The monthly value increases to 333 euros (previously: 313 euros).
- Accommodation: The monthly value increases to 282 euros (previously: 273 euros).
What does this mean for employers?
These changes affect all employers who provide their employees with benefits in kind such as meals or accommodation. The new values must be correctly taken into account in payroll accounting, as they are considered a taxable non-cash benefit. Start-ups with flexible working models or benefits such as meal allowances in particular should ensure that their payroll software is up to date. The increase in non-cash benefits can also have an impact on employees’ tax and social security contributions. Employers should therefore communicate openly how these changes could affect net pay. At the same time, companies can use these adjustments to make their benefits more attractive – for example, through tax-free allowances for meals or housing costs.
Practical tip:
Review your payroll processes and adapt them to the new benefits in kind values. Take the opportunity to inform your employees about possible tax-free benefits that can be offered in addition. Professional payroll software can help you to implement these changes efficiently.
Minimum wage and low income threshold increase
On January 1, 2025, the statutory minimum wage will be raised from the current 12.41 euros to 12.82 euros per hour. At the same time, the earnings threshold for mini-jobs (marginal employment) will rise from 520 euros to 556 euros per month. This adjustment will be made as part of the regular review of the minimum wage by the Minimum Wage Commission.
What impact does this have?
The increase in the minimum wage affects not only marginally employed workers, but also working students, interns and other forms of employment with low pay. Employers must ensure that existing employment contracts are adapted and that the new hourly rates are correctly accounted for. The increase in the low income threshold allows mini-jobbers to work more hours without losing their social security exemption. However, this can be a challenge for start-ups with a limited budget, especially if they are heavily reliant on mini-jobs or part-time employees. At the same time, the adjustment also offers opportunities: companies can strengthen their position in the competition for skilled workers by offering attractive remuneration.
Practical tip:
Review all existing employment contracts and adapt them to the new minimum wage regulations. Recalculate personnel costs and check whether it might make sense to restructure mini-jobs into part-time positions. Inform your employees about the changes in good time and use digital tools for payroll accounting to avoid errors.
Accessibility Reinforcement Act comes into force
From June 28, 2025, new products and services must be designed to be accessible – this applies in particular to digital offerings such as websites, apps or software solutions as well as physical products such as ATMs or ticket machines. The aim of the Accessibility Improvement Act is to give people with disabilities equal access to products and services.
Which companies are affected?
Companies from the e-commerce, financial services and public transport sectors as well as providers of digital products and services are particularly affected. There are transitional periods for existing products until 2030 – however, new products must be fully accessible from June 2025. Implementation often requires technical adaptations such as read-aloud functions for websites or larger font sizes for digital displays. At the same time, accessibility also offers economic benefits: studies show that accessible offerings can appeal to a broader target group and increase customer satisfaction.
Practical tip:
Check your digital offerings for accessibility in good time and consult experts to make any necessary adjustments. Use funding programs or tax incentives to finance accessibility measures.
Extension of the research allowance
From January 1, 2025, the research allowance will be made significantly more attractive for companies. The maximum funding amount will increase from 1 million euros to 2 million euros per company per year. This tax incentive is intended to motivate start-ups and small and medium-sized enterprises (SMEs) in particular to invest more in research and development (R&D).
What is the research allowance?
The research allowance is a tax benefit granted to companies that invest in innovative projects. Both basic research as well as experimental developments and applied research are eligible for funding. Funding is provided regardless of the sector and is particularly relevant for technology-oriented start-ups.
What changes are there?
In addition to increasing the amount of funding, the application process for the research allowance will be simplified from 2025. Companies will be able to submit their applications completely digitally and the processing time by the responsible authorities will be shortened. It is also being examined whether smaller projects with smaller budgets can be given greater consideration.
Practical tip:
If your startup invests in R&D, check whether your projects are eligible for funding. Carefully document all relevant costs and project progress to ensure that your application is processed quickly. If necessary, consult specialist advisors to prepare the application in the best possible way and make the most of the funding available.
Adjustments to trade tax
From 2025, trade tax will be reorganized in many municipalities, as the federal government is giving local authorities more leeway in setting assessment rates. The aim is to enable financially weak municipalities to generate more revenue, while economically strong regions can increase their attractiveness through lower assessment rates.
What impact does this have?
The changes may mean that the trade tax burden varies considerably depending on the location. It will be even more important for start-ups and SMEs to choose their location carefully or to take possible tax burdens into account when expanding to other cities or municipalities.
Practical tip:
Regularly check the rates of assessment in your municipality and compare them with alternative locations. If your company is growing or planning new branches, factor tax aspects into your location decision. Seek advice from a tax consultant to benefit from lower tax rates in the long term.
Changes to the start-up grant
From 2025, the start-up subsidy for business founders starting out from unemployment will be reorganized. The amount of funding will remain unchanged – it will continue to be based on the last unemployment benefit received plus a lump-sum allowance of 300 euros for social security contributions – but approval will be made more flexible.
What will change in concrete terms?
In future, the duration of the funding can be adjusted individually, depending on the progress of the business model and the turnover generated. In addition, founders are to receive more support through training and advice to increase their chances of success. The application for the start-up grant will also be digitized, which should speed up the process.
Practical tip:
If you are planning to start a business from unemployment, prepare your business plan carefully and take advantage of the new training opportunities. Find out about the requirements for the grant in good time and make sure that your application is complete.
Changes to the flat-rate withholding tax
The German government is planning to reform the flat-rate withholding tax on investment income from 2025. The current tax rate of 25% will remain in place, but an additional tax-free amount will be introduced: In future, investment income of up to 1,000 euros per person will remain tax-free (previously: 801 euros). For married couples, this amount will double to 2,000 euros.
What does this mean for investors?
The increase in the tax-free amount provides relief for small investors and the self-employed with lower investment income in particular. At the same time, it remains important to declare all investment income correctly – especially in the case of foreign investments or cryptocurrencies.
Practical tip:
Review your investments and make targeted use of the increased allowance to optimize your tax burden. Find out about possible tax advantages for long-term investments such as shares or funds.
Adjustments to the artists’ social security contribution
The artists’ social security contribution (KSA) will remain an important issue for companies that regularly commission artistic or journalistic services – such as graphic designs, texts or music productions – in 2025. The levy rate is expected to rise slightly in order to ensure the financing of the artists’ social insurance.
What does this mean for clients?
Companies still have to pay 5% of the fee to the Artists’ Social Security Fund (KSK) if they commission such services. However, many start-ups are not aware of this obligation and risk additional payments or fines during tax audits.
Practical tip:
Regularly check your contracts with freelancers or agencies and clarify at an early stage whether there is an obligation to pay tax. Document all relevant payments carefully and use tax consultant services to optimize your tax planning.
Extension of tax incentives for working from home
Tax incentives for working from home will be permanently extended from 2025: The maximum amount for the home office lump sum will increase from the previous 600 euros to 1,000 euros per year. In addition, the limit of 120 days will no longer apply – employees and the self-employed can now claim every day spent working from home.
What are the advantages?
The new regulation creates more flexibility for employees and the self-employed who regularly work from home. At the same time, it remains important that the work area is clearly separated from the private area – for example by means of a separate study.
Practical tip:
Document your working days in the home office carefully and check possible tax benefits from additional income-related expenses such as work equipment or internet costs.
Further information
More information on portals, functions and funding programs that are likely to be introduced in 2025 can be found in this post (part 1) as well as in this post (part 2) and in this post (part 3) and most recently here (part 4).
