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The ultimate guide on how to start freelancing in Germany as an expat

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Have you been dreaming about starting your freelance career in Germany but simply didn’t know where to start?

We know all too well how complicated German bureaucracy can be, and starting your own freelance business is a huge step. After all, you suddenly have to manage your taxes, pay VAT, and communicate with your local tax office in weirdly worded letters you only half understand. 

But freelancing also comes with a lot of positives: You are flexible to work whenever and wherever you want, and you can scale your business up or down depending on your personal circumstances. 

And it’s actually not that complicated at all to start freelancing in Germany! With our comprehensive guide, you will get first-hand knowledge of what to do to jump start your freelance career – taxes and all.

On this page, you will find answers to the most commonly asked questions around freelancing in Germany – and some additional links to even more helpful articles surrounding this topic.

So let’s get you ready for your German freelance career!

First things first: How to start freelancing in Germany

Freelancing has gained a lot of popularity over the past years – and rightfully so, since you can determine your own hours, workload, and be your own boss. Unlimited vacation days, am I right?

But if you are looking into starting a business in Germany, there are a few things you should know before you dive head first into freelancing in a foreign country.

Let’s start off with some tax related lingo. You definitely don’t need to speak fluent German to work in Germany, but you should know some of the most important terms when it comes to organising your income and taxes. 

➡️Don’t worry, we’ve got you covered! Here’s a glossary of all the words you need to know as a freelancer in Germany.

Depending on your personal situation, you might have to look into getting the right visa that will allow you to freelance in Germany. We are talking about visas a bit later in this article, but you can jump straight to that chapter here.

If you are eligible to live and work in Germany, the next step would be to get your dedicated tax number, and register as a self-employed worker with the German tax office, the Finanzamt

➡️Here’s all you need to know about tax numbers for freelancers in Germany

To register as a freelancer in Germany, you need to fill out a tax registration questionnaire called Fragebogen zur steuerlichen Erfassung. This is a form that basically aims to find out more about your planned freelance profession as well as your estimated income.

One thing you will find out sooner or later is that Germans love their printed paper. Official paperwork more often than not must be submitted in a printed out and manually signed version. Annoying, I know.

That’s why we built a digital version of the tax questionnaire. You can fill it out online and digitally submit it to your tax office. Saving the trees, one online form at a time. 

But it gets even better! We also have a comprehensive guide on how to fill out the tax registration form to become a freelancer in Germany. 

➡️Head over here to read a step by step guide on how to fill out the Fragebogen zur steuerlichen Erfassung.

It usually takes about 2-4 weeks to receive your tax number. 

Let’s recap what you need to get started:

  1. Figure out your visa situation for staying and freelancing in Germany
  2. Learn the most important tax terms and official German lingo 
  3. Fill out the tax registration form and send it to your tax office
  4. Wait a couple of weeks to get your tax number
  5. Start freelancing in Germany!

And if you want to be extra prepared, read these 2 articles that give you an idea about the do’s and don’ts of freelancing in Germany:

➡️ The top 9 tax tips for the self-employed 

➡️7 mistakes to avoid when starting out as a Freiberufler in Berlin

Am I a “Freiberufler” or a “Gewerbetreibender”?

As soon as you plan on becoming self-employed in Germany and filling out the tax registration form, you will need to answer this important question: “Am I a Freiberufler or a Gewerbetreibender?” 

This distinction is important both for your registration and also for tax purposes. Because Freiberufler (freelancer) only need to fill out the questionnaire for tax registration, whereas Gewerbetreibende (sole traders)  also have to register with the Gewerbeamt (trade office).

You cannot choose whether you practice a profession as Freiberufler or operate a Gewerbe. Rather, this is decided by the nature of your activity and is clearly defined in the tax law.

Take the test here and find out what category applies to you.

Freiberufler
Freelance professions are defined as scientific, artistic, literary, teaching or educational activities. Among the professions that are considered freelance are doctors, lawyers, engineers, tax consultants, journalists or physiotherapists. 

Gewerbetreibende
Generally speaking, when you are self-employed but the rules for being a Freiberufler don’t apply to your profession, you are a Gewerbetreibender. Typically, you are working in a craft, manufacturing, or commercial profession. Those include, for example, handicraft and industrial businesses, as well as being self-employed in the gastronomy sector or operating an online shop. In addition, GmbHs or AGs are always considered Gewerbe, regardless of their activity.

➡️Still not sure, whether you are Freiberufler or Gewerbetreibender? No problem, you can read more details here

What is a Kleinunternehmer?

Alright, now that you know if you are a freelancer or a sole trader, let’s look at another tax option for you: the Kleinunternehmerregelung, or small business owner rule.

When starting out as a freelancer, chances are you qualify as a small business owner. You are considered a small business in Germany if you don’t earn more than 22,000 EUR in your first year of freelancing, and your income does not exceed 50,000 EUR in the following year.

As a Kleinunternehmer in Germany, you are exempt from paying VAT, which means you can offer lower prices to your customers and won’t need to submit a VAT return.

So, if that’s the case for you and you don’t want to have to pay VAT, you can simply check the corresponding box in the tax registration application, or notify your tax office, if you already sent off the tax questionnaire.

However, it might not always be the best option to apply for the Kleinunternehmerregelung. If you have a lot of business expenses, it can be very beneficial to pay VAT, as you then get to deduct the VAT you pay for business-related purchases, thereby reducing  your tax liability. 

➡️To find out which option is the best for you individually, have a read through our small business in Deutschland article. 

Side hustler or full time self-employed?

Do you plan to generate all of your income through freelancing, or are you starting a side hustle alongside full time employment? 

As long as your visa permits it, it’s perfectly fine to start a freelance side hustle when you already have a job. And there are plenty of creative ways to do so — check out some ideas for side jobs here.

There are a few things to watch out for though, such as informing your health insurance provider and being aware of the potential implications on your regular job.

Generally, if your income from self-employment is less than the salary you receive from your employer, and the time you spend on self-employment does not exceed that spent on your regular job, you’ll be able to happily manage both. 

If your self-employed work starts to overtake that of your regular job, you’ll be obliged to take out insurance for your self-employed business in addition to your insurance as an employee. This can also affect what kind of pension insurance you’re eligible for (more on these topics later).

Similarly, you may run into problems with your employer if your side job is impacting your performance at work. While an employer can’t forbid you from starting a side hustle, they can exercise a veto right if your full time job suffers.

➡️ To make sure you’ve got all bases covered, read this guide to starting a side hustle in addition to your full time job.

If you find that running a side business is right up your alley, you might even find that you’ve got another skill to offer. You can start a second line of freelance work, whether or not you’re working full time. You’ll need to register the second business and invoice everything under a second tax number, but as long as you stay organised, you’ll manage. 

➡️ Read about starting a second line of freelance work here

“The Finanzamt and I“

We know the German Finanzamt can seem quite intimidating. They send you all these complicated letters that are hard to understand even for German native speakers. Sometimes, it feels like they are just waiting for you to miss a deadline or to make a mistake in order to give you a fee. 

But actually, it’s not that bad. When you receive a letter from the Finanzamt, it is either to inform you of something that affects your taxes or to remind you if you have missed a deadline. That’s why we explain the letters in all detail that you will receive from the Finanzamt after your registration as a self-employed professional in Germany.

➡️Understanding the Finanzamt – The Steuernummer letter 

➡️Understanding the Finanzamt – The prepayment letter

➡️Understanding the Finanzamt  – The Istversteuerung

Words to look out for in letters by the Finanzamt are Mahnung, Vollstreckungsauftrag and Pfändung. Mahnung basically means reminder, so if you see this word, it means you probably missed a deadline. Vollstreckungsauftrag, or foreclosure, is when things have really become serious and you need to take action. If you do nothing, you could end up with a Pfändung, or seizure of your assets.

If you want to get in contact with your tax office case worker directly, consider calling or visiting them in person. Oftentimes, little misunderstandings can be resolved quickly and they will be happy to help you out. If you are worried about the language barrier, consider asking a German speaking friend to help you and go to the tax office with you. 

How much should I save for taxes?

This is the all-consuming question every freelancer in Germany is asking themselves: How much should I put aside for taxes?

To answer this question thoroughly, we first have to understand the different taxes you have to pay.

  1. Income tax
  2. Value added tax (optional)
  3. Trade tax (optional)

1. Income tax return

Everyone working in Germany must pay income tax. How much you have to pay depends on the amount of taxable income you earn. Taxable income refers to the amount you earn after business expenses have been deducted. 

The income tax you owe is determined in different tiers and on a percentage basis, with a maximum rate of 42% – and if you’ve earned less than 9,744 EUR (tax-free threshold 2021), you don’t have to pay income tax at all. 

Income tax is declared in the end-of-year tax declaration. 

2. Value added tax (VAT)

As a self-employed person, you generally have to charge VAT on your goods or services and in turn pay VAT to the Finanzamt. It’s different from income tax and trade tax, as it’s added to the invoice amount and is shown separately on invoices.  

We’ll explain more about VAT and how to pay it in the next chapter.

3. Trade tax

If you registered as a Gewerbetreibender, or tradesperson, you will have to pay an additional trade tax. This tax differs depending on where your business is registered in Germany. Big cities tend to be more expensive, whereas smaller towns and villages have lower trade tax rates. 

You can ask for the specific percentage at your local tax office, or look it up online on this website, and take it into account in your tax planning.  

➡️If you want to dive deeper into the different taxes in Germany, read this article with a comprehensive overview of the varying taxes.

Okay, now we know which taxes to look out for. But how much do you have to set aside throughout the year?

We know that estimating your income can be quite difficult, especially when starting out as a freelancer, but the closer you can get to estimating your income, the more accurately you can anticipate how much tax you’ll have to pay.  

So keeping track of your income as well as your expenses will help you estimate how much tax you’ll need to pay. 

➡️Accountable is a great tool to track your income as well as your expenses. Simply upload photos of receipts or enter your invoices to see an overview of your finances. Here’s a download link to get our free app.

If you want to put a number on it, make sure you frequently check the official income tax calculator from the German finance department. Here you can add your annual income and see a detailed calculation of how much you will likely have to pay for your income tax. Keep in mind though, that this tool does not consider your business expenses!

What is VAT?

We already touched on VAT, or Umsatzsteuer in German, but there is a lot more to uncover when talking about the value added tax.

Value added tax (VAT) is a tax applied to every product sold or service provided. As a freelancer in Germany, your products or services are subject to VAT. That means you must charge your clients the additional tax amount on your invoices and then pay it on to the state.

VAT ID

Before you can charge VAT on your invoices, you must first apply for a VAT ID. This number is usually issued when you fill out the tax registration questionnaire, but you can also apply for it later on. 

The VAT number is used in Germany to keep track of trades happening between different countries in the EU and making sure that the tax is paid correctly.

VAT rates in Germany

There are two different VAT rates in Germany: 19% is the general rule, but there’s also a reduced rate of 7% – and a very small number of services are charged with no VAT at all.

For most services, the general VAT rate of 19% is applicable. It’s only in a few cases that the reduced rate will be charged. Artists, for example, are often able to apply the reduced rate of 7% for their services.

There is a comprehensive document listing all reduced services online, however, it is quite complicated to understand, so we recommend speaking to some fellow freelancers first, to get a general idea of what they are charging.

If you are still unsure of which VAT rate to charge, you can contact your local tax office and ask for advice. 

➡️We also spoke to our tax consultant, Andreas Reichert, about the different VAT rates and he shared some helpful tips and insights. Read his take on VAT in this article.

VAT return

Okay, now that you have your VAT ID and have charged the right VAT rate on your invoices, it’s time to actually submit your VAT return.

There are two VAT returns you have to submit: The annual end-of-year VAT declaration as well as monthly, quarterly, or annual VAT returns. When you have to submit those is determined by the tax office. 

VAT returns must be submitted online via the official ELSTER tax portal and list your income from the predetermined time period. So, if you are filing quarterly VAT returns, you have to include all income from the first, second, third, or fourth quarter. 

➡️Our app also allows you to quickly and easily submit your VAT return. Simply keep track of your expenses in the Accountable app, and create an automated VAT return whenever you need. Here’s how it works!

As a freelancer in Germany, you can also deduct VAT from your business expenses to reduce the total amount of VAT you owe. So don’t forget to keep your receipts and enter your expenses in your VAT return to reduce your total VAT liability. 

➡️If you are looking for a step by step guide on how to fill out the ELSTER VAT form, look no further. We answer all your questions in this article on how to file your German VAT return.

How to invoice clients

Invoicing is an important aspect of every freelancer’s life. After all, you worked to get your first client, completed the job, and now it is time to get paid! But in order to make sure you get paid on time, you need to create your invoices according to the governing laws in Germany.

Compliant invoices in Germany must contain the following information:

  • Your full name
  • Your business address (the address where you registered your freelance business)
  • The full name and address of the person receiving the invoice
  • Your tax number or your VAT ID
  • The date the invoice was created
  • An consecutively numbered invoice ID 
  • A description of the goods delivered or services provided
  • The quantity or scope of the goods or services provided
  • The price for the goods or services listed
  • The date or time period in which the goods or services were rendered 
  • The VAT rate applied to the items listed, or information on why VAT is not applied
  • Invoice amounts, including Net amount, VAT amount, and Gross amount
  • Payment instructions including your bank account details or other payment options

Optionally, you can also include information about potential discounts that were applied to the invoice and specific payment terms in regards to when you wish to be paid.

➡️ Read more on how to create the perfect invoice.

➡️Unfortunately, it does happen that invoices are not paid on time. In that case, you have a few options as a freelancer in Germany. You can read all about it in this article.

Creating invoices can be time consuming and even when you know what you’re doing, there’s plenty of room for small mistakes. But our free invoice template is here to help! All you have to do is enter your details and in a matter of seconds you’ll receive a professional invoice, designed according to legal requirements.

➡️Start invoicing now!

Clients overseas: How does Reverse Charge work?

So you’ve got your invoicing down to a fine-tuned process, when suddenly you land a client that’s based outside of the country. What do you do?

While you should be primarily servicing German clients, it’s not uncommon for self-employed foreigners in Germany to have networks and clients based outside the country, and that’s perfectly okay, as long as you invoice correctly.

➡️ For the full breakdown of what you need to know about working with international clients, read this comprehensive guide.

One of the biggest considerations is whether or not to add VAT to your invoices for non-German clients. The answer is simple for Kleinunternehmer: you don’t charge VAT.

For the rest of us, there’s a handy rule called the Reverse Charge system, or the Reverse Charge Verfahren, which can be applied when you invoice clients outside of Germany but still within the EU. In such cases, it’s the buyer – your client – who is obliged to pay VAT on the goods or services received, and thus you do not need to charge VAT on your invoices. When applying the Reverse Charge procedure, it must be stated on your invoices.

Typically, if your international clients are outside of the EU, you do not need to charge VAT. Read this short overview of how VAT works for clients outside of Germany.

➡️ You can find more detailed information about how the reverse charge procedure works here.

What can I deduct?

There is actually a whole range of business expenses that you can deduct. The benefit of doing it? You save taxes!

Here are some examples of what you can deduct: 

  • Insurance costs
  • Costs for tax advisors
  • Further education and training
  • Costs for your workplace, e.g. internet, telephone, furniture 

But there is a lot more. So we created a handy tool where you can find everything that’s deductible.

➡️Here are some more examples of what you can deduct that you might not have thought about before.  

➡️Unsure what information you need about an expense in order to deduct it? We tell you here

➡️Even before you start working as a freelancer, you can already deduct costs you might have for your business. If you want to know how, continue reading here.
➡️Only doing freelance work as a side gig? You can still deduct a lot of costs!

➡️Working from home? We tell you what to deduct for your home office

What are the tax deadlines?

Freelancing offers a lot of flexibility, but when it comes to taxes, there are a few deadlines you should put in your calendar.

First and foremost, be aware of the official tax period in Germany: The financial year is from January 1 to December 31st.

German income tax return deadlines

The next big date to remember is the deadline for your annual income tax declaration. For your 2020 tax, you should have submitted your German tax return by July 31st 2021. For your 2021 tax return, this will be July 31st 2022.

In some cases, the tax office will request that you make income tax payments in advance. It may take one or two years of freelancing before the tax office makes a calculation of how much tax you’re likely to owe and asks you to pay in advance, and these payments are usually made quarterly.

If you’re required to make quarterly advanced payments, keep these deadlines in your calendar for reference:

  • 10th March: advance payment for the 1st quarter
  • 10th June: advance payment for the 2nd quarter
  • 10th September: advance payment for the 3rd quarter
  • 10th December: advance payment for the 4th quarter

German VAT return deadlines

For your annual VAT return summary that confirms the total amount of VAT that you charged throughout the tax year, the same deadline as for your income tax return applies: July 31st of the following year.

Your VAT returns throughout the year must be submitted either monthly, quarterly, or annually, depending on which dates the tax office predetermined for you.

But in general, you must file your VAT returns by the 10th day of the month that follows the reporting period. For example, if you report your VAT quarterly, your first deadline for the year will be April 10th, for the period of January 1st through to March 31st. 

➡️You can find more info on these deadlines over here.

What happens if I miss a deadline?

Don’t panic, we all make mistakes and forgetting a deadline can happen to anyone. If you forget to submit your tax returns by the due date, there are two things you can do:

  1. Depending on how far behind the deadline you are, it might pay off to submit your documents asap! Sometimes, if you’re close enough to the deadline (1 or 2 days) it will still be considered on time.
  2. Write a letter to your local tax office letting them know that you missed the deadline and ask for an extension. 

In fact, you can even receive an ongoing extension, so that each month or quarter, you get a bit of extra time to gather your invoices and receipts and send off your return. This is something your tax consultant or accountant can help you with, or simply contact your local tax office and ask for information on deadline extensions.

➡️Find out more about what happens if you miss a VAT deadline here.

What do I need to know about insurances and pensions in Germany

A very important aspect to setting up as a freelancer in Germany is making sure you’re adequately covered by the right insurances.

Perhaps most important is your health insurance (“Krankenversicherung”), not just because it ensures you’ll have quick and affordable access to healthcare, but also because it’s mandatory. 

Without an employer to foot half of the bill — as is the case for people with traditional employment — the self-employed must pay all their health insurance contributions on their own, unless they qualify for the social security fund for artists (“Künstlersozialkasse”). 

You cannot opt out of having health insurance, and if you try to, you’ll end up having to back-pay. So, get onto it early! This guide gives a run down of the most important things to know about the German healthcare system and how it applies to the self-employed.

While it’s not mandatory, it’s up to you to ensure you have something in place to support yourself when you eventually reach the stage in life where you’re no longer generating income through work. That’s right, we’re talking pension insurance, retirement funds, and so on. The German system is based on a system of three pillars. This article outlines each of them and how they apply to freelancers.

What other insurances are there to consider?

While none of these are mandatory, it’s worth thinking about whether other types of insurance are right for you. 

  • Professional indemnity insurance: Protects you against potential negligence claims made by a client
  • Legal insurance: Provides you with legal advice and covers legal costs in case of a dispute (but often doesn’t cover freelance business contracts)
  • Insurance for your equipment: Protects you against loss, theft or damage to your business equipment
  • Personal liability insurance: This is extremely common in Germany, and covers you in claims of bodily injury and property damage sustained by others for which you are legally responsible

➡️ We have compiled a comprehensive guide on insurances for freelancers in Germany, so hop over here to jump right in.

Visas 

Are you actually allowed to work as a freelancer in Germany? 

Foreign citizens can be permitted to work on a freelance basis in Germany, but it’s important for you to check for sure whether you need a visa, and what kind of visa you’re eligible for.

If you’re an EU citizen or permanent resident, or you’re from Iceland, Liechtenstein, Norway, or Switzerland, it’s your lucky day. You’re allowed to live and work – and freelance – in Germany without needing to obtain any visa or residence permit. You can skip to the next section.

Non-EU citizens without permanent residency in Germany must obtain a residence permit that allows them to undertake freelance work in Germany. This could be a freelance or artist visa, or an exception on a different kind of residence permit that explicitly permits freelance activity. Ask at your local embassy to find out which visas are available to you.

➡️ Find out more about residence permits or visas in this article.

When it comes to renewing a freelance visa in Germany, you’ll need to prepare a profit and loss statement (“Gewinnermittlung”) and have it signed off by a registered tax accountant as part of your renewal application. Read about how to prepare a Gewinnermittlung here.

Change of address

Alright, last but not least, let’s talk about changing your address. In Germany, you are obligated to register at your local Bürgeramt, or citizen’s office, within two weeks of your move. If you don’t register – or if you wait too long to do so – you could be hit with a fine, so it’s best to stay on top of it.

If your new home is in the same municipality as your previous one, the process of changing your address is called Ummeldung. If you’re moving to an entirely different city or municipality, it’s considered an Anmeldung

Depending on how far away you move, this might also affect which tax office you submit your tax returns to. 

While you’re not strictly required to notify the tax office of your change of address as this is handled by the citizen’s office, it can be a good idea to let your old tax office know of your change of address. After all, having a good relationship with your tax office can make your life a lot easier!

➡️Other things to keep in mind when changing address as a freelancer is notifying your landlord and other authorities. We have compiled a small guide for what to do when you change addresses here. 

Tino Keller, Managing Director & Founder of Accountable Germany
Tino Keller, Managing Director & Founder of Accountable Germany

Tino already built two companies and therefore knows the challenges freelancers face first hand. With Accountable he wants to solve all those challenges related to taxes.
When not working, Tino enjoys a nice Asado with a glass of Malbec as well as celebrating one of the occasional wins of favourite soccer team 1. FC Köln.

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