Insights
VAT
Income Tax Basic Flat-Rate Deduction and Input Tax Flat-Rate Deduction
At the end of June the Federal Council also gave the green light to the 2025 Budget Supplementary Act, which will bring comprehensive changes to the basic flat-rate deduction for income tax (ESt) and to the input tax flat-rate deduction in 2025 and 2026.
If a trader or self‑employed person uses a cash‑basis accounting method, they can – by claiming the basic flat‑rate deduction – deduct business expenses on a flat‑rate basis without proof. Because most business expenses are considered "flat‑rated", only certain expenses (e.g. purchases of goods or wages) can be taken into account in addition.
A prerequisite for the basic flat‑rate deduction is that a specific turnover threshold was not exceeded in the preceding year. If the basic flat‑rate deduction has once been claimed and is subsequently abandoned (for example by switching to a normal cash‑basis accounting), a new flat‑rate deduction of business expenses is permissible only after the expiry of five fiscal years.
Provided the conditions for the income‑tax‑law basic flat‑rate deduction are met, entrepreneurs can also claim input tax on a flat‑rate basis (input tax flat‑rate deduction). The flat‑rate input tax is 1.8% of turnover, with specific flat rates provided for certain professional groups.
Increase of the turnover threshold and the average rates
Until now (up to and including 2024) most professional groups were allowed to claim 12% of their received turnover as a flat‑rate business expense under the basic flat‑rate deduction. This average rate is now being increased step‑wise. In 2025 most professional groups may now claim 13.5% and from 2026 15% of turnover as a flat‑rate business expense.
Excluded are income from certain activities, in particular income from commercial or technical consulting, for substantially involved shareholder‑managing directors, for supervisory board members, property managers and income from literary, lecturing, scientific, teaching or educational activities. For these incomes the average rate remains 6% as before.
The relevant turnover thresholds that serve as the assessment base are also being significantly increased. Up to and including 2024 the prior‑year turnover may not exceed EUR 220,000. For the year 2025 the turnover threshold is now EUR 320,000 and for the years from 2026 EUR 420,000.
Because the turnover threshold is increased, the amount that can be claimed as input tax under the flat‑rate deduction also rises. In 2025 this amount (at an average rate of 1.8%) rises from EUR 3,960 to EUR 5,760. From 2026 onward, flat‑rate input tax of up to EUR 7,560 can be claimed.
Conclusion
Through the 2025 Budget Supplementary Act the basic flat‑rate deduction and the input tax flat‑rate deduction will become more tax‑attractive in the future. Whether a flat‑rate deduction or a cash‑basis accounting method is more advantageous should be examined early in a profitability comparison.
A prerequisite for the basic flat‑rate deduction is that a specific turnover threshold was not exceeded in the preceding year. If the basic flat‑rate deduction has once been claimed and is subsequently abandoned (for example by switching to a normal cash‑basis accounting), a new flat‑rate deduction of business expenses is permissible only after the expiry of five fiscal years.
Provided the conditions for the income‑tax‑law basic flat‑rate deduction are met, entrepreneurs can also claim input tax on a flat‑rate basis (input tax flat‑rate deduction). The flat‑rate input tax is 1.8% of turnover, with specific flat rates provided for certain professional groups.
Increase of the turnover threshold and the average rates
Until now (up to and including 2024) most professional groups were allowed to claim 12% of their received turnover as a flat‑rate business expense under the basic flat‑rate deduction. This average rate is now being increased step‑wise. In 2025 most professional groups may now claim 13.5% and from 2026 15% of turnover as a flat‑rate business expense.
Excluded are income from certain activities, in particular income from commercial or technical consulting, for substantially involved shareholder‑managing directors, for supervisory board members, property managers and income from literary, lecturing, scientific, teaching or educational activities. For these incomes the average rate remains 6% as before.
The relevant turnover thresholds that serve as the assessment base are also being significantly increased. Up to and including 2024 the prior‑year turnover may not exceed EUR 220,000. For the year 2025 the turnover threshold is now EUR 320,000 and for the years from 2026 EUR 420,000.
Because the turnover threshold is increased, the amount that can be claimed as input tax under the flat‑rate deduction also rises. In 2025 this amount (at an average rate of 1.8%) rises from EUR 3,960 to EUR 5,760. From 2026 onward, flat‑rate input tax of up to EUR 7,560 can be claimed.
Conclusion
Through the 2025 Budget Supplementary Act the basic flat‑rate deduction and the input tax flat‑rate deduction will become more tax‑attractive in the future. Whether a flat‑rate deduction or a cash‑basis accounting method is more advantageous should be examined early in a profitability comparison.