SteuerGo FAQs

(2023) What records are required?

The basis for the net income method is simple records that capture all income received and expenses paid during the year. According to the "cash basis accounting" principle, business income must be recorded in the financial year it is received, and business expenses must be deducted in the financial year they are paid.

You are therefore spared the dreaded double-entry bookkeeping, the complicated commercial profit and loss account, and you do not need to prepare a balance sheet or conduct an inventory. How you collect your receipts and calculate your figures is largely up to you.

However, it is not sufficient to create a single item for "business income" and "business expenses". If your business is larger, you should break down these items, preferably according to the structure in the tax form "Form EÜR".

Recording income

Even if you use the net income method, you are required to record your income individually for VAT purposes (§ 22 para. 2 UStG; BFH ruling of 26.2.2004, BStBl. 2004 II p. 599). You must list

• VAT-liable income with net amounts and corresponding VAT, separated by tax rates (7%, 19%),
• VAT-exempt income.

Separate records of business expenses

Certain business expenses must be recorded individually and separately from other business expenses, as they are only deductible to the legally prescribed extent (§ 4 para. 7 EStG). Specifically

• entertainment expenses at 70%,
• gifts up to 35 Euro per year and business associate,
• costs of a home office (only if it is the centre of all activities),
• withdrawals and deposits, if you wish to deduct interest expenses as business expenses beyond the basic amount of 2.050 Euro.

Asset register

You must continuously record the following assets in an asset register with their acquisition or production costs and the date of their acquisition, production or deposit (§ 4 para. 3 sentence 5 EStG):

• non-depreciable fixed assets, such as land, investments, other financial assets, non-depreciable intangible assets.
• depreciable fixed assets acquired, produced or deposited into business assets after 5.5.2006. This applies to assets with acquisition or production costs of more than 1.000 Euro net (for acquisitions from 1.1.2008).
• certain current assets acquired, produced or deposited into business assets after 5.5.2006. This applies to shares in corporations, securities and comparable non-certificated claims and rights, land and buildings in current assets.

Note: In this asset register, for depreciable assets (e.g. company car, PC, office furniture, etc.), the book values at the beginning and end of the financial year, as well as the corresponding depreciation amounts and any special depreciation under § 7g EStG, must also be entered.

A further special inventory is required for low-value assets. Those acquired or produced between 2010 and 2018 must

• not be recorded up to 250 Euro net (up to 2017: 150 Euro) (they are written off immediately) and
• be recorded in a special account from 250.01 Euro (up to 2017: 150.01 Euro) to 1.000 Euro net and depreciated as a collective item over 5 years.

Withdrawals and deposits

These must be recorded separately if you have incurred "other interest on debt" for business loans. Otherwise, the deduction of interest on debt is limited to the interest for financing assets and further interest up to only 2.050 Euro (§ 4 para. 4a sentence 6 EStG).

Investment deduction

Special records are required if you wish to claim an investment deduction. This is possible if the profit - without the investment deduction - is not higher than 200.000 Euro.

Home office

For self-employed individuals claiming a home office for tax purposes, specific recording obligations apply according to § 4 para. 7 EStG. These obligations concern the recording of costs attributable to the home office. It is acceptable to estimate these costs and then document them after the end of the financial or calendar year using the annual statement from the financial institution. This also applies to consumption-based expenses such as water and energy costs.

For depreciation amounts, it is sufficient to record them once a year promptly after the end of the respective calendar or financial year. The special recording obligations under § 4 para. 7 EStG do not apply for the deduction of an annual flat rate.

Net income method users are not generally subject to any special legal recording obligations. HOWEVER: A recording obligation may arise under the VAT Act or the "Principles for the proper management and storage of books, records and documents in electronic form and for data access (GoBD)". Entrepreneurs are required to record non-cash transactions within ten days. Cash receipts and payments must be recorded daily. Information must not be lost, so an orderly filing of incoming and outgoing invoices and systematic recording of payments is required. This is usually done by continuously numbering and coding incoming and outgoing invoices, as well as filing them in special folders or through electronic records. Subsequent changes in accounting, such as cancellations or corrections, must be clearly documented. Therefore, do not forgo ongoing records even if you use the net income method.

Important: As an entrepreneur, you must store all documents, including MS Office documents, PDF files and emails, in a way that ensures they cannot be altered afterwards. This means that subsequent changes to electronic documents, even unintentional ones, must be excluded, or traceability through a complete change history must be ensured. Therefore, store electronic documents in a document management system.