Small-business flat rate

Definition

The small-business flat rate (Kleinunternehmerpauschalierung, § 17 Abs 3a EStG) is a separate way of determining profit for small businesses: expenses are set at a fixed percentage of business income. It has applied since the 2020 assessment and only to income from a trade or self-employed work.

Not the same as the VAT small-business rule

The similarly named small-business rule concerns VAT, while this flat rate concerns income tax. Since 2025 they are linked: the flat rate requires that the conditions for the VAT exemption are met. You can still choose to use one without the other.

Rates and limits 2026

The expense flat rate is 45 % of business income, capped at € 24.750. For service businesses it is 20 %, capped at € 11.000. Which businesses count as service businesses is set by regulation (BGBl II 2020/615); for mixed businesses the larger share of turnover decides.

It applies up to turnover of € 55.000 (a gross limit). Exceeding it by up to 10% within the same calendar year is harmless; beyond that the flat rate falls away for that year, and for the following year as well.

Several businesses

If you run several businesses, the sum of their turnovers counts. If that sum exceeds the limit, the flat rate is available for none of them. If it stays below, you may decide business by business. Income from letting property does not count towards the limit.

What stays deductible on top

On top of the flat rate, your compulsory SVS contributions and the basic part of the profit allowance reduce profit. The SVS and tax calculator includes both.