Small-business flat rate 2026

Definition

The small-business flat rate (Kleinunternehmerpauschalierung, § 17 Abs 3a EStG) is a separate way of determining profit for small businesses with income from a trade or self-employed work: expenses are set at a fixed percentage of business income. In 2026 that is 45.00 %, capped at €24,750, or 20.00 %, capped at €11,000, for service businesses, up to turnover of €55,000.

Rates and limits by year

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.

The rules

• Service business: which businesses count is set by sector in the Dienstleistungsbetriebe-Verordnung; for mixed businesses the activity with the higher business income decides.
• Turnover limit: €55,000 (a gross limit). Exceeding it by up to 10.00 % 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: the sum of their turnovers counts. If it exceeds the limit, the flat rate is available for none of them; if it stays below, you decide business by business. Income from letting property does not count towards the limit.
• Deductible on top: only the compulsory SVS contributions, a share of public transport passes and pass-through travel costs; the basic part of the profit allowance also reduces profit.
• Lock-in when switching: if you voluntarily switch to another way of determining profit, you may only return after three business years (§ 17 (3a) Z 9).

See also

• Small-business VAT scheme, the VAT exemption with the same limit.
• Flat-rate expenses, the alternative for higher turnovers.
• Profit allowance, only the basic part alongside the flat rate.