German Cash Basis Accounting Guide
This guide explains who in Germany may or must use the Einnahmenüberschussrechnung (EÜR), how it works in practice, and how its figures flow into your annual tax return. You’ll also find a concise comparison with balance-sheet accounting (Bilanzierung) and practical tips for smooth filing.
Use the table of contents below to jump straight to what you need.
Who may (or must) use the EÜR?
The EÜR is a simplified, cash-basis profit calculation available to taxpayers who are not obliged to keep double-entry books and prepare a balance sheet. Typical users are freelancers (Freiberufler), many small traders, and side activities.
Size thresholds & bookkeeping obligations
If you exceed statutory size thresholds for turnover and/or profit, or you are obliged under commercial law, you must keep double-entry books and prepare financial statements. Merchants under the HGB and corporations (e.g., GmbH/UG, AG) generally fall into this category.
Who may continue using EÜR
Freelancers can usually use the EÜR regardless of turnover, and small commercial businesses below the bookkeeping thresholds can opt for it. Side businesses and many sole proprietors benefit from the simpler compliance.
How the EÜR works (mechanics)
In an EÜR, taxable profit equals business income actually received in the calendar year minus business expenses actually paid in the calendar year (cash principle).
Cash principle & 10-day rule
Under the cash principle, timing follows payment flow (Zufluss/Abfluss). The “10-day rule” is a narrow exception: certain regularly recurring payments that are due at year-end and paid within ten days before or after year-end are allocated to the year of economic affiliation.
Assets, GWG & depreciation (AfA)
Fixed assets used longer than one year are depreciated (AfA). Low-value assets (GWG) up to a statutory net limit can usually be expensed immediately; optional pool depreciation is available for items within a defined band, written off evenly over several years.
VAT (Umsatzsteuer) treatment
If VAT-registered, record income and expenses net of VAT; input VAT and output VAT settle via VAT returns and do not affect profit. Kleinunternehmer under § 19 UStG generally record gross amounts because they neither charge nor deduct VAT.
Records & documentation
Maintain a chronological list of business income and expenses with supporting receipts. Keep an asset register for depreciable items (often attached as Anlage AVEÜR when applicable). Ensure audit-proof retention and clarity.
Integrating the EÜR into your tax return
The EÜR result flows into your annual income tax return via standardized forms.
Anlage EÜR (ELSTER)
Submit the EÜR electronically using Anlage EÜR through ELSTER. Paper filing is typically limited to hardship cases. File one EÜR per business activity.
Transfer to the right income schedule
- Trade/business (gewerblich): Transfer your EÜR profit or loss to Anlage G of the income tax return.
- Freelance/professional (selbständige Arbeit): Transfer to Anlage S.
- Agriculture/forestry: Use Anlage L; special EÜR variants may apply.
Other affected returns
- VAT: Advance returns and the annual VAT return if registered.
- Trade tax (Gewerbesteuer): For commercial businesses; a credit under § 35 EStG may offset part of the burden in the income tax assessment.
EÜR vs. Balance-sheet accounting (Bilanzierung)
| Topic | EÜR | Balance sheet (Bilanz) |
|---|---|---|
| Method | Cash basis; limited exceptions (10-day rule). | Accrual basis; recognize when earned/incurred. |
| Complexity | Simple list of income/expenses. | Double-entry bookkeeping; balance sheet & P&L. |
| Typical users | Freelancers; small traders below thresholds. | HGB merchants; corporations; larger businesses. |
| Timing effects | Profit sensitive to payment dates around year-end. | Smoother via accruals/deferrals; period-true profit. |
| External stakeholders | Less informative for lenders/investors. | Preferred for financing and analysis. |
Quick checklist
- Eligibility: Confirm you’re not under bookkeeping obligations.
- Method: Apply cash principle; use the 10-day rule correctly.
- Assets: Expense GWG immediately; depreciate larger assets.
- VAT: Net recording if registered; gross if Kleinunternehmer.
- Filing: Submit Anlage EÜR via ELSTER; transfer to Anlage G/S/L.
Common pitfalls
- Misapplying the 10-day rule to payments that are not “regularly recurring.”
- Forgetting to keep an asset register or to post AfA consistently.
- Mixing VAT into profit calculation when VAT-registered (use net).
- Ignoring trade tax for commercial activities.
- Missing the switch to accrual accounting after crossing thresholds.
Deadlines at a glance
- Income tax return incl. Anlage EÜR: statutory deadline (later if represented by a tax advisor).
- VAT advance returns: monthly/quarterly by the 10th of the following month (with possible extension).
- Trade tax return: typically aligned with income tax timelines.
Transitioning from EÜR to accrual accounting
If you become obliged to keep books, prepare an opening balance sheet and switch prospectively. Pay attention to cut-off, receivables/payables recognition, and inventory. Coordinate with your advisor to avoid double counting or omissions during the transition year.
Mini examples
Example 1 — Cash receipt timing
You invoice €5,000 on December 20 and are paid on January 5. Under EÜR, income belongs to January (new year), unless special rules apply.
Example 2 — 10-day rule for insurance
Your annual insurance premium due December 31 is paid on January 8. As a regularly recurring expense within ten days, it is deductible in the old year.
Example 3 — GWG purchase
You buy a €600 net office chair and pay immediately. As GWG, it’s fully deductible in the purchase year; no ongoing AfA.
Frequently asked Questions about the German Cash Basis Accounting Method:
ℹ️ Click a question to reveal the answer:
Who is allowed to use the EÜR in Germany?
Taxpayers not obliged to keep double-entry books—typically freelancers and small traders below statutory thresholds—may determine profit via the EÜR.
Who must use balance-sheet accounting instead?
HGB merchants, corporations (GmbH/UG/AG), and businesses exceeding size thresholds must keep double-entry books and prepare financial statements.
What is the core principle of the EÜR?
Cash principle: income is recorded when received, expenses when paid. Profit = cash income minus cash expenses.
How does the 10-day rule work in the EÜR?
Certain regularly recurring items due at year-end and paid within 10 days of year-end are allocated to the old year. Use narrowly and only when all conditions are met.
Do I still depreciate assets under the EÜR (AfA)?
Yes. Long-lived assets are depreciated. Low-value assets (GWG) up to the statutory limit can be expensed immediately; pool depreciation is available for mid-range values.
How is VAT handled in the EÜR?
If VAT-registered, record income/expenses net of VAT; VAT is handled via VAT returns. Kleinunternehmer generally record gross amounts.
Which form do I file for the EÜR?
File Anlage EÜR electronically via ELSTER. Paper filing is usually restricted to hardship cases.
Where do I put the EÜR result in my income tax return?
Trade/business: Anlage G. Freelance: Anlage S. Agriculture/forestry: Anlage L.
Do I need an asset register with the EÜR?
Yes. Keep a fixed-asset register for depreciable items; attach the corresponding overview (e.g., Anlage AVEÜR) when required.
Can I switch from EÜR to balance-sheet accounting voluntarily?
Yes. You may switch voluntarily, e.g., to meet lender expectations. Apply consistently and prepare an opening balance sheet.
What happens if I exceed the thresholds mid-year?
You typically switch from the following financial year. Plan the transition (cut-off, receivables/payables, inventory) with care.
Are private withdrawals (Entnahmen) relevant in the EÜR?
They don’t affect profit directly, but must be documented to separate business and private cash/property clearly.
How are prepaid expenses handled under the EÜR?
Prepayments are generally deductible when paid. Beware exceptions (e.g., regularly recurring payments around year-end).
Can I use EÜR if I run multiple small activities?
Yes, but keep separate, clear records. File one EÜR per distinct business activity as required.
How do I treat mixed-use assets (e.g., phone, car)?
Allocate business vs. private proportion reasonably (e.g., logbook for cars). Only the business share is deductible.
Do I need inventory counts with the EÜR?
Not for profit determination itself, but if you hold significant goods/stock, maintain suitable documentation for VAT and business control.
Are financing costs deductible under the EÜR?
Yes, business interest and fees are deductible when paid. Watch for any statutory interest limitation rules for larger businesses.
How are losses handled with the EÜR?
Losses flow through to your personal return and may be carried back/forward under general income tax rules, subject to caps and conditions.
Does the EÜR change how I pay advance income tax (Vorauszahlungen)?
No. Advances are based on assessed prior-year results. If your current year drops, you can request a reduction with evidence.
What documentation should I keep for audits under the EÜR?
Complete receipts, bank statements, invoices, contracts, mileage/logbooks, VAT returns, and the asset register with AfA schedules—organized and retrievable.