Since 2020 a flat rate in income tax can be availed by a small business as long as the yearly net turnover is not more than € 35,000. Beginning in 2023, the turnover limit will be increased to € 40,000.
This form of a flat rate is available for businesses with income from self-employed work or income from commercial enterprise wherein profits are calculated under the cash basis accounting.
The flat-rate operating expenses amount to 45 % of the operating income up to € 18,900 max. resp. 20 % of a service business up to € 8,400 max.
Note: Significant shareholders and shareholder-managing directors, executive board members, supervisory board members, and foundation directors are exempted from this flat rate.
The increased turnover limit of up to € 40,000 will not apply to those additional earned revenues which are not covered under the flat rate (for example income from renting and leasing).
Author S. achieved turnover amounting to € 37,000 from his literary work and € 10,000 rental turnover for a total of € 47,000. The turnover from self-employed work are solely considered for the flat rate. Since it did not exceed the revenue limit of € 40,000, S. can utilize the flat rate.
The increased revenue limit of € 40,000 can be used for the first time in the tax assessment for the calendar year 2023.
Tip: In any case, check if the income tax rate is beneficial to you, particularly in comparison to the basic flat rate or to a comprehensive cash basis accounting. For this matter, we are here to support you.