Profit and loss statement in Germany: EÜR explained in English

Introduction: Profit and loss statement

The Einnahmenüberschussrechnung (EÜR) is a simplified method of calculating profit. It is based on a straightforward principle: revenue minus expenses equals profit. Unlike double-entry bookkeeping, the EÜR only looks at actual cash inflows and outflows.

The method is defined in Article 4(3) of the Income Tax Act. It allows taxpayers to determine profit by subtracting operating expenses from revenue. Advance payments — both incoming and outgoing — are fully taxable because only real payments count, not outstanding obligations.

The basis of the EÜR

The EÜR follows the cash basis principle: only money that actually enters or leaves the business (via bank account or cash) is recorded. Services performed, but not yet paid for, do not affect the calculation.

Why the EÜR matters

The resulting profit is the key figure for your taxes. It directly influences:

• VAT payable to the tax office
• Advance VAT returns
• Annual VAT return
• Income tax for freelancers and self-employed individuals
• Trade tax and corporation tax (if applicable)

Dealing with VAT in the EÜR

VAT plays a central role in preparing an EÜR. VAT collected from customers (7% or 19%) must be recorded as income, while paid input tax is recorded separately as an expense. Payments made to the tax office and VAT refunds must each be listed as their own operating items.

Input tax may be recorded according to the cash basis principle (at the payment date) or, alternatively, at the invoice date. Small businesses using the small business regulation under Article 19 UStG do not charge VAT and therefore do not record VAT or input tax in their EÜR.

Who can use the EÜR? Revenue limits and eligible legal forms

Not every business is allowed to use the EÜR. The key rule is simple: Anyone who is not required to prepare a balance sheet may submit an EÜR to the tax office. Revenue levels and legal form determine whether this simplified method is allowed — with one important exception: freelancers can always use the EÜR, regardless of income.

Who is allowed to use the EÜR?

• Commercial traders and GbRs that are not entered in the commercial register.
• Businesses earning less than €600,000 in annual revenue or less than €60,000 in annual profit. If either limit is exceeded, a balance sheet becomes mandatory.
• Freiberufler (e.g., doctors, architects, consultants) — they may use the EÜR regardless of income.

Who cannot use the EÜR?

Businesses registered in the commercial register or operating under certain legal forms must prepare a balance sheet. These include GmbH, UG, OHG, KG, AG etc.

For small or newly founded businesses, being able to submit an EÜR instead of full annual financial statements can significantly reduce administrative workload.

 

Key points to consider when preparing an EÜR

• Depreciable assets must be written off over their useful life. This tax depreciation (AfA) reduces profit gradually rather than all at once.
• Only interest actually paid during the financial year can be recorded as an expense. Interest that has accrued but not yet been paid is not included.
• All cash-based income must be recorded at the moment the payment is received—not when the service is performed.
• Loan repayments do not affect profit: incoming loan amounts are not income, and outgoing repayments are not operating expenses.

 

Your tax return

The EÜR is a key component of your income tax return. While it determines the profit from your self-employment, income tax is calculated based on all taxable income sources — not just business profit.

Income sources subject to income tax

• Employment income
• Capital income (e.g., interest or dividends)
• Rental and leasing income

These income types are added together with the profit calculated via the EÜR. Certain tax allowances reduce the total, after which the tax office calculates your taxable income. Only income above the annual basic tax-free allowance is taxed.

Deductions applied by the tax office

• Special expenses
• Exceptional costs
• Specific tax benefits (e.g., for property ownership)

Because your self-employment profit is one of the largest components of your taxable income, the EÜR plays a central role in determining how much income tax you owe.

 

Profit and loss statement (EÜR) vs. balance sheet accounting

The key difference between the EÜR and balance sheet accounting lies in the cash-based principle. In the EÜR, only the actual payment date matters. If you receive payment in 2026 for a service performed in 2025, it is recorded in 2026. The same applies to advance payments for future services.

This means that, for tax purposes, revenues and expenses are recognised strictly when money flows in or out. The EÜR therefore shows how much profit you earned, but it does not show the overall financial health of your business.

A balance sheet, by contrast, provides a complete snapshot of a company’s financial situation at a specific reporting date. It lists:

• Assets (e.g., cash, inventory, equipment)
• Liabilities (e.g., loans, payables)
• Equity

Assets are divided into fixed and current assets, and the balance sheet also shows how these resources are used. This helps estimate future cash flows and financial stability — something the EÜR alone cannot do.

Depending on whether a business uses debit taxation or actual taxation, a balance sheet will show either invoiced amounts or actual payments received. Businesses eligible for the EÜR typically use the actual payment method, benefiting from its simplicity.

 

Data transfer

The form for a standardised EÜR can be downloaded from the official website of the federal ministry of finance 💬Bundesfinanzministerium. The form for the previous year usually becomes available around the beginning of April.

If you understand German, you can review the official EÜR form linked above to see exactly which details must be submitted. The form also clarifies why small businesses with annual revenue under €17,500 can no longer submit an informal, handwritten EÜR. Until the end of 2017, this simplified method was permitted. Since January 2018, however, even small-scale entrepreneurs and low-revenue freelancers must file their EÜR using the official digital form.

Do I have to submit the EÜR electronically?

Yes, the EÜR must be submitted electronically. A paper submission is only allowed in rare cases of proven hardship.

Since 2018, you also need an electronic tax signature to file your EÜR. This is the so-called ELSTER certificate, which you can obtain directly through the official ELSTER online portal. Once issued, the certificate can be used with standard accounting and tax software as well as within the ELSTER application itself.

The tax authorities strongly recommend filing your EÜR through the ELSTER online portal, as it ensures secure and compliant electronic submission.

 

How can I sign up for the small business regulation?

You can apply for the small business regulation 💬Kleinunternehmerregelung directly in the ELSTER tax registration form online. Simply tick the corresponding box to declare that you want to be treated as a small business for VAT purposes. No additional application is required.

 

FAQ

Can I switch between single-entry and double-entry bookkeeping?

Switching between EÜR (single-entry) and balance sheet accounting (double-entry) is possible, but it requires careful planning and extra work. If you exceed the revenue or profit limits that allow the EÜR, you do not have to switch immediately — you should wait until the tax office instructs you to start preparing a balance sheet.

Even if you stay below the limits, you may voluntarily switch to a balance sheet at the start of a new business year. This can be useful, for example, when applying for loans or getting a detailed financial overview. However, balance sheet accounting is significantly more work than the EÜR.

Switching back from double-entry to the EÜR is also allowed, but only if your revenue and profit remain below the legal thresholds for two consecutive years. For example: if you fall below the limit in 2018, you may only switch to the EÜR in 2020.

How and when can I switch?

You can generally switch methods at the end of a financial year, applying the new method from the start of the following business year. Depending on the direction of the switch, different documents are required:

• Switching from EÜR → balance sheet: You must prepare an opening balance sheet that records all assets and inventory. A reconciliation statement is also required because the two systems recognise income differently. This prevents double-counting or missing transactions.
• Switching from balance sheet → EÜR: You must prepare a final closing balance sheet and a reconciliation statement to ensure that all receivables, prepayments and open items are transferred correctly.

What is a reconciliation statement?

A reconciliation statement (Überleitungsrechnung) adjusts for timing differences between the two methods. For example, balance sheet accounting recognises revenue when an invoice is issued, while the EÜR only records revenue when payment is received. Without this reconciliation, transactions can easily be duplicated or missed.

Important: Three-year commitment

Once you switch methods, you must use the new method for at least three years. Switching back earlier is not permitted — even if your revenue later rises above or falls below the legal thresholds.