The New Year in Germany is ushered in by several tax reforms to be applied during 2025. Accordingly, the companies with headquarters based in the country will update their invoicing systems. In a futher addition to the numerous changes related to VAT return for SME. 

The e-invoicing 

From the beginning of the year, each private entity and entrepreneur must receive electronic invoices. Furthermore, these invoices for domestic transactions must also be issued in this format, although transitional rules apply. 

News for SMEs 

The thresholds for eligibility under this scheme will be adjusted. The turnover limit for the previous year will be raised to 25.000€ (from 22.000€) and for the current year to 100.000€ (from 50.000€). Additionally, businesses will be required to declare turnover as soon as it reaches 100.000€, rather than waiting until the end of the year. Moreover, the EU Small Business Regulation will apply, allowing small businesses to adhere to German tax rules for sales in other EU member states, thereby reducing bureaucracy. According to societies, the conservation period for accounting documents will be reduced from 10 years to 8 years.  

VAT and tax reductions 

VAT has been the tax that has undergone the most changes in the 2025 entry. Firstly, the VAT rate applicable to farmers and foresters will decrease from 8,4% to 7,8% starting in 2025 

Secondly, the threshold for mandatory monthly VAT advance returns will be increased to 9.000€. Further on, German Government provides the option to reduce childcare costs up to 80% for children under the age of 14 (or for a disabled children under the age of 25 who is unable to care for themselves). In addition, expenses related to education, sports, and leisure activities can be deducted. The maximum deduction will increase to 4.800€ per child, up from 4.000€. 

Finally, the photovoltaic systems purchased, commissioned or extended in 2025 with a maximum gross capacity of 30kW per residential or commercial unit will qualify for tax exemption. It is provided while the total capacity does not exceed 100kW per taxpayer or co-employer. 

If you would like us to take care of your accounting, tax declarations and/or payroll in Germany as well as in more than 50 other countries, please do not hesitate to contact us. 

Can Auxadi help?

Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.

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All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.