Profit determination & EÜR
Preparation of the profit determination ("Einnahmen-Überschuss-Rechnung") under section 4(3) EStG for freelancers, self-employed persons and smaller commercial businesses.
The EÜR forms the tax basis for determining business profit, the income tax return and often also for VAT and trade tax matters.
What does profit determination include?
In a protit determination ("Einnahmen-Überschuss-Rechnung"), business income and business expenses are compared. As a rule, the inflow and outflow principle under section 11 EStG applies, unless specific tax rules provide otherwise.
Business income
Recording of business income including VAT received, where relevant for VAT purposes. This may include outgoing invoices, incoming payments and other business income.
Business expenses
Review and allocation of business expenses, such as premises costs, travel costs, work equipment, insurance, training, advisory costs and ongoing business costs.
Depreciation and fixed asset register
Fixed assets are generally not deducted in full immediately, but depreciated over their useful life. Low-value assets and pool depreciation must be reviewed separately.
EÜR schedule and electronic filing
The profit determination is transferred to the EÜR schedule and filed electronically with the German tax authorities where this has been commissioned and is required.
Who can use an EÜR?
The EÜR is particularly relevant for taxpayers who are not required to determine their profit by comparing business assets. The classification must be reviewed in advance.
Freelance activities within the meaning of section 18 EStG often determine their profit by EÜR, unless voluntary balance sheet accounting is used.
Self-employed activities with manageable document volume and no bookkeeping obligation can often be reflected by an EÜR.
Commercial sole proprietors can use the EÜR as long as there is no bookkeeping obligation under German commercial or tax law.
For GmbH and UG, an EÜR is generally not available. These entities are subject to bookkeeping and balance sheet obligations under German commercial law.
Distinction from balance sheet accounting
Whether an EÜR is permissible does not depend solely on practical simplicity. The legal form, commercial-law obligations and tax bookkeeping thresholds are particularly relevant.
Section 141 AO and commercial-law bookkeeping obligations
Commercial businesses may become subject to bookkeeping obligations under section 141 of the German Fiscal Code (AO) if certain turnover or profit thresholds are exceeded. Independently of this, bookkeeping obligations may arise under German commercial law. Corporations such as GmbH and UG are generally required to prepare balance sheets.
Typical individual EÜR questions
Trips, travel costs and private use
For business vehicles, private-use portions, logbook, one-percent method, travel costs and actual costs must be clearly separated.
Domestic study and home office
Expenses for a domestic study or home office are deductible only under the statutory conditions. Use, centre of activity and the applicable lump sums are relevant.
Investment deduction amount and special depreciation
Investments may be anticipated or favoured for tax purposes under section 7g EStG if the requirements are met. The actual investment intention and later use must be taken into account.
Small entrepreneur scheme or regular VAT taxation
The VAT classification under section 19 UStG or as an entrepreneur subject to regular VAT taxation affects invoicing, input VAT deduction, VAT returns and ongoing obligations.
Required documents
Complete records and supplementary information are required for a proper EÜR. The specific document request is made after the facts have been classified.
Outgoing invoices and incoming payments
Invoices, credit notes, payment overviews, platform statements and other evidence of business income.
Incoming invoices and expense receipts
Invoices, receipts, contracts, payment evidence, bank statements and other evidence of business expenses.
Assets and investments
Purchase documents, usage data, leasing or loan agreements and information on business or private use.
Private use and mixed expenses
Information on private co-use, business use, trips, premises, telephone, internet or other mixed-use assets.
Preparation process
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Classification — Review whether an EÜR is permissible and appropriate or whether bookkeeping or balance sheet accounting is required.
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Document request — Agreement on the required receipts, reports and supplementary information.
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Determination of profit — Recording and allocation of income, expenses, depreciation and other adjustments.
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Transfer to the tax return — Transfer to Anlage EÜR and the other affected tax returns, where commissioned.