If you have just gone self-employed in Germany, bookkeeping comes down to two decisions and four areas of work, and the rest is organization. The first decision usually makes itself: freelancers and small traders determine their profit as a cash-basis income surplus statement under section 4 (3) of the German Income Tax Act (EStG), business income minus business expenses, with no balance sheet. You only have to produce a balance sheet if commercial law requires it or if the tax office tells you to under section 141 of the Fiscal Code (AO), because your turnover exceeded 800,000 euros or your profit exceeded 80,000 euros. The second decision is the small-business rule in section 19 of the VAT Act (UStG): stay below 25,000 euros total turnover in the previous year and below 100,000 euros in the current one, and your sales are VAT exempt, you charge no VAT and you file no VAT returns. Four areas of work apply to almost every business, but how they play out depends on your legal form and your tax status: collect and keep your receipts, record them properly and immutably (section 146 AO and the GoBD), report VAT during the year unless you are exempt, and file once a year. The retention periods in section 147 (3) AO are no longer a uniform ten years: accounting vouchers run eight, business letters six. And right at the start there is a deadline many people miss: you must report opening a business or starting freelance work within one month, under section 138 (4) AO. Everything here applies to Germany; what differs in Austria on thresholds, deadlines and cash registers is in Bookkeeping for the Self-Employed in Austria.
I do not do my own bookkeeping, and I do not hand all of it over either. The preparation runs automatically here, while sign-off and the tax return stay with a human and with my tax advisor. How that setup works is on Hiring AI employees, and what is worth it for a one-person business is in AI for Freelancers: What Pays Off. This post assumes none of that. It shows the duties first, whether you handle them with a folder, with software, or with help.
Cash-basis statement or balance sheet: who needs what
There are two ways to determine profit, and the simpler one is the right one for most self-employed people.
The decisive sentence is in section 4 (3) EStG: anyone who is not required by law to keep books and does not keep them voluntarily may treat the excess of business income over business expenses as their profit. For freelancers that means the cash-basis statement stays available no matter how big you get, because section 141 AO applies expressly only to commercial businesses and to farming and forestry.
For traders, section 141 (1) AO names two thresholds: more than 800,000 euros of total turnover in a calendar year, or more than 80,000 euros of profit in a financial year. The same figures appear as an exemption for sole merchants in section 241a HGB. What matters in practice is section 141 (2) AO: the obligation does not start when you cross the line, but with the financial year following the notice from the tax office. So you get a letter before it begins.
That is the law as it stands in the provisions named above, and it is not tax advice.
Retention: what, how long, counted from when
Section 147 (1) AO lists what you have to keep in an orderly fashion, and subsection 3 says for how long. Since the shorter period for accounting vouchers, three periods run side by side.
Two things about this are regularly misunderstood. First, when the clock starts: under section 147 (4) AO the period runs from the end of the calendar year in which the voucher was created, not from the date on the voucher. A voucher from March 2026 therefore starts on 31 December 2026 and may go at the end of 2034 at the earliest. Second, the extension: under section 147 (3) sentence 5 AO the period does not expire while the documents matter for assessment periods that are still open. During a tax audit you throw nothing away.
GoBD: the rules for digital receipts
Digitally, the same principles apply as for a paper folder, only they are more strictly verifiable. The statutory core is in section 146 (1) AO: entries and records must be made individually, completely, correctly, in a timely manner and in order. On top of that comes immutability under section 146 (4) AO: an entry may not be changed in a way that makes the original content unascertainable, or that leaves it unclear whether the change was original or made later. That is exactly where the most popular improvised solution fails: a standalone spreadsheet with no logging, where any row can be overwritten without a trace. What decides this is not the file format but whether the procedure as a whole keeps a traceable change history.
What this means day to day is set out by the tax administration in the GoBD, the Federal Ministry of Finance letter of 28 November 2019, last amended on 14 July 2025. Four points matter for a one-person business:
- Received digitally means kept digitally. An invoice that arrives as a PDF is kept as a PDF. Printing it and deleting the file is not enough.
- Scans must match visually. Section 147 (2) no. 1 AO requires the reproduction of received business letters and accounting vouchers to match the original visually. A scan has to look like the original, not merely contain the same figures.
- For e-invoices the structured part is enough. The GoBD amendment of 14 July 2025 makes that explicit. You only have to keep the human-readable part of a hybrid invoice, such as the PDF inside a ZUGFeRD file, if it contains additional tax-relevant information.
- Readable and machine-analyzable at any time. Section 147 (2) no. 2 AO requires this for the whole retention period. A format nobody can open in eight years does not qualify; that is why choosing accounting software includes the question of what happens to the data when you switch.
There is also a duty that has applied to every domestic business since 1 January 2025, small businesses included: you have to be able to receive e-invoices.
VAT returns: rhythm and deadline
If you are not a small business under section 19, you report VAT during the year. Section 18 (1) UStG sets the deadline: by the tenth day after the end of the reporting period, electronically, with payment due the same day. Which period applies to you is in section 18 (2) UStG.
Two practical additions. First, the permanent deadline extension: under section 46 UStDV the tax office has to grant you one extra month on request; if you file monthly, you pay a special advance payment of one eleventh of the previous year's payments under section 47 UStDV, which is offset later. Second, the founder rule: section 18 (2) sentence 4 UStG nominally prescribes the calendar month for founders, but for the assessment periods 2021 to 2026 sentence 6 makes the expected tax for the current year decisive instead. That special rule ends with the year 2026 (as of September 2026).
The small-business rule in section 19 UStG
Since 1 January 2025 this is no longer a non-levy of the tax but a genuine exemption: under section 19 (1) UStG your sales are VAT exempt if your total turnover did not exceed 25,000 euros in the previous year and does not exceed 100,000 euros in the current one. Five points belong to it:
- No VAT returns during the year and no annual VAT return. Section 19 (1) sentence 2 UStG expressly disapplies the filing duties of section 18 (1) to (4) UStG. The tax office can still ask you individually under section 149 (1) sentence 2 AO. Section 18 (4a) UStG still applies, though: if you owe VAT as the recipient, for example on a commission from a booking platform based elsewhere in the EU (section 13b UStG), you file VAT returns for the periods concerned and an annual return.
- The 100,000 euros bite immediately. Per the Ministry of Finance letter of 18 March 2025, the very sale that crosses the threshold is no longer exempt. From that moment the general filing duties apply too.
- In your founding year the 25,000-euro line counts. According to the same letter, when you take up an activity only the actual total turnover of the current year matters, measured against 25,000 euros rather than 100,000. Nothing is extrapolated. For therapists and other health professions, exempt treatments don't count toward the threshold, see Bookkeeping for Therapists: What AI Prepares.
- Opting out binds you for five years. Under section 19 (3) UStG you can irrevocably waive the exemption until the end of February of the second following year, but you are then bound for at least five calendar years. This mainly pays off with large initial investments carrying input VAT.
- E-invoices: receive yes, issue relaxed. Section 34a UStDV expressly allows a small-business invoice to always be transmitted as an "other invoice", meaning as a PDF or on paper.
What belongs in a quote as a small business, and which of those details only become mandatory in the later invoice, is in How to Write a Quote That Convinces.
What can change from year to year
Almost every number in this post has moved at some point. These are the places to check at the next turn of the year (as of September 2026).
On the last row: section 149 (2) AO gives you until 31 July, and with a tax advisor subsection 3 extends that to the end of February of the second following year.
The grind that follows: assigning receipts
Once the duties are settled, the actual work remains: every receipt has to be found, assigned and checked against the statement. That is not thinking, that is matching. As a self-employed person you claim business trips with the same meal allowances as employees; rates and template are in Per Diem Germany 2026: Rates and Template.
Here, that step is handled by Peter, my AI employee for receipts and bookkeeping. He works inside my bookkeeping interface in the browser, reviews the newly arrived receipts, sets the document type and reconciles the statement against them. I made the numbers from his first run public: 116 receipts reviewed, 38 of 40 assigned correctly, a little over an hour. The interesting part is not the 38 but the two: they stayed open because his process could not decide the case, and he reported them as open instead of making them fit. An assistant that guesses would be worse here than no assistant at all.
Two limits are hard-wired: he does not post entries, his process only covers assigning and reconciling, and amounts, dates and document numbers always come from the screen, never from memory. Sign-off stays with me, the tax return with my tax advisor. How inbox, receipts and drafts fit together is in AI Agent for Bookkeeping and Inbox; the finished package for that is Frieda. Which data I put into an AI system at all is in AI and Privacy: What the AI Gets to See.
Handling outstanding customer invoices is a separate workflow alongside receipt processing; Automate Payment Reminders and Dunning covers reconciliation, draft reminders and approval.
Frequently asked questions
Do I need double-entry bookkeeping as a self-employed person?
As a rule, no. Freelancers may use the cash-basis income surplus statement under section 4 (3) EStG permanently, because section 141 AO only covers commercial businesses and farming and forestry. Traders switch only above 800,000 euros of turnover or 80,000 euros of profit, and even then only after the tax office has notified them under section 141 (2) AO.
How long do I have to keep invoices?
Accounting vouchers, meaning most invoices and receipts, eight years; books, records and annual accounts ten; other business letters six, all under section 147 (3) AO. The count starts at the end of the calendar year in which the voucher was created (section 147 (4) AO), not from the date on the voucher.
May I scan paper receipts and throw the originals away?
Section 147 (2) AO allows storage on a data medium if it complies with the principles of proper bookkeeping. For received business letters and accounting vouchers the reproduction has to match visually and stay readable and machine-analyzable for the whole period. Which originals you should keep on paper anyway is a question for your tax advisor.
Do I have to file VAT returns as a small business?
No. Section 19 (1) sentence 2 UStG expressly disapplies the filing duties of section 18 (1) to (4) UStG, meaning both periodic and annual VAT returns. Three caveats: the tax office can ask you individually under section 149 (1) sentence 2 AO, once you cross the threshold during the year, the general filing duties apply from that point, and if you owe VAT as the recipient under section 13b UStG, section 18 (4a) UStG requires VAT returns for those periods.
How to take it further
Take an hour and settle three things in this order: whether you use the cash-basis statement or have to prepare a balance sheet, whether you want the small-business rule (work out how much input VAT you would actually have in year one), and where your receipts land, in a way that still reads in eight years. Only then does it make sense to look at software.
The filing question is where most people stall, because you have to settle it yourself once; what a receipt filing system that then holds up looks like is in its own post. You do not have to think it through alone: bring the question to the weekly live Q&A call in my community AI Employee Framework, which saves you the first round of trial and error.
Once that stands and the monthly sorting starts to grate, that is the moment for an AI employee. Which tasks suit that and which are better left with you is covered in Which Tasks You Can Hand Off to AI; how I built my own receipt workflow, with a written process, a learning mode and a control count, I show there as well.
