Various tax advice for freelancers in Germany

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Posted

Hi there, I was wondering if anyone had clear and definitive information as to the deal surrounding paying tax as a freelancer, when working in Germany. What do you have to pay, how much, do you have to pay into the pension scheme, what percentages are involved with paying tax etc. Thanks!

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Posted

if you wonder why nobody else cared to reply to this inquiry yet: it is far too global, does not give any clues about what you do (or plan to do), if you are single or married with children, how much income you plan to generate and much more... people here on Toytown are happy to help, but at least have the courtesy to do some research in the many threads that deal with 1) taxation for self-employed/freelancer or 2) pension schemes in Germany and then come back with clear and detailed questions. From reading all the other threads that have already dealt with a magnitude of your questions you will learn a lot and also what specific questions you need to rise in order to get a reply. Otherwise you will not get any help, I guess...

Cheerio

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Posted

Do you really mean „freelance“ as opposed to „self-employed“?

Although a freelancer is self-employed, being self-employed doesn’t necessarily mean that you are freelance - it depends on what work you do, and even upon where you live! There are clearly defined regulations, but also a dark-grey area that can lead to repeated arguments with the local Gewerbeamt (business registration office) and/or tax office to decide whether you are FL or SE.

Best thing is to contact your local „Industrie- und Handelskammer“ (IHK) where you will receive up-to-date expert advice and loads of reading material.

HTH

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Posted

Hello,

I have put the following advice together from what I have been reading(For a friend, and I will check it in a few months if it is correct)

Would someone be able to check if it is right, or make minor corrections where nedded?

Cheers,

Z

To be a freelancer, you can earn up to 10,000 without having to pay tax. You must decalre yourself as a freelancer, and be able to show you can do this, by showing past jobs, and any current jobs lined up.(Tell me if you want a 3 month thing or something).

To register as Freiberufler, which is a type of freelancer, you must show that each job will be unique and specific for each client. If you are a Freiberufler and your work is Geistlich(intelectual or requiring knowledge)you do not have to pay Gewerbesteuer tax. A job description such as a design consultant would qualify as this.

It is also not necessary to pay the Arbeitslosengeld tax, pension or health insurance tax.., there is almost no tax that is absolutely required.

The other option is to be self employed, which will require you to set up your own business, which is still very expensive for the most simple option.

For both freelancing and being self employed, there is no requirement to pay MsWt(Equivilant of VAT) if your turnover is less than 17,500 per annum.

Some general tips: Do not ever charge tax seperatly, as you will be taxed on the tax you charge anyway, which would negate any benifit. For examle, if you charge $100 and $15 tax, you would have to pay $30 to the tax office.

It would be best not to send any invoices until you have been aprooved as a freelancer by the finanzmat. It is important that every invoice number is unique, regardless of grouping or category.

It is unlikely that you will be able to obtain german health insurance if you are a freelancer, unless you have been a resident in germany for at least one year and can show a regular income.

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Posted

You left out the most important advice: get a Steuerberater.

I don't think that 10000 number is right.

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Posted

Some general tips: Do not ever charge tax seperatly, as you will be taxed on the tax you charge anyway, which would negate any benifit. For examle, if you charge $100 and $15 tax, you would have to pay $30 to the tax office.

I presume you mean Mwst (VAT). You would only be taxed on it if you haven't paid it on to the taxman. e.g. if you receive Mwst in December but don't pass it on to the taxman until January then it will be added to your yearly total, but then deducted the following year.

It is unlikely that you will be able to obtain german health insurance if you are a freelancer, unless you have been a resident in germany for at least one year and can show a regular income.

Unless things have changed since I came here, this is not true. You may have to prove that you were insured before, for Brits being in the NHS is enough, but I've never heard of someone not being able to get German health insurance as soon as the come here.

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Posted

All the rules changes every year, example, the amount your earn, the amount to which Mwst needs to be paid, income tax (depends upon your income slab). would a wise idea to consult a good tax advisor.

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Posted

It would be best not to send any invoices until you have been aprooved as a freelancer by the finanzmat. It is important that every invoice number is unique, regardless of grouping or category.

They must not only be unique, they must also be cronologically sequential and with no gaps in the number sequence.

I also have a feeling the 10,000€ tax free is too high, I think it's more like 7 - 8k€.

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Posted

You left out the most important advice: get a Steuerberater.

I don't think that 10000 number is right.

The advice is for such a simple scenario that you don't need a Steuerberater. Would you always get a tax advisor in your home country for things you could do yourslef? I would guess that from your comment I am otherwise correct.

They must not only be unique, they must also be cronologically sequential and with no gaps in the number sequence.

I also have a feeling the 10,000€ tax free is too high, I think it's more like 7 - 8k€.

Aside from that, is everything else OK?

What is the class of freelancer that can avoid a lot of tax by being a benifit to society liek artists, engneers etc?

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Posted

Would you always get a tax advisor in your home country for things you could do yourslef?

You are not in your home country - you are in Germany - where they build their tax system like Citroen* build cars.

*Why build simply when complicated is also possible?

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Posted

The advice is for such a simple scenario that you don't need a Steuerberater. Would you always get a tax advisor in your home country for things you could do yourslef? I would guess that from your comment I am otherwise correct.

No, you should guess that I don't know if it's right or not, which is exactly why you need a tax advisor. A steuerberater is necessary here because the laws are complex, the potential savings/pitfalls many, and the finanzamt won't help.

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Posted

The other option is to be self employed, which will require you to set up your own business, which is still very expensive for the most simple option.

As a self-employed person, I don't think that's true. Perhaps you could expand on what's "expensive" about being self-employed? A lot of self-employed people I know would say it's a heck of a lot less "expensive" than being an employee - lower tax bills, higher income etc.

Self-employed businesses come in all sorts of forms: from people just selling their knowledge to people that have to invest capital sums to produce and or sell their product, pay staff and so on. - and

so generalisations are of limited value.

It's perhaps easy for me to say because my business *is* business, finance etc, but it's easy to make this harder than it is. To me - running a small business - it seems quite simple. I apply rules, claim allowances etc in similar ways as would be applied to me were I employed according to many variables such as size of income. They are just different rules and more of them (including VAT).

And, as the above point says, there are all sorts of people to draw info from. The point about advisers. Maybe you would not need one in the UK or US - but you'd probably have access to more alternatives (be it family members, colleagues, small business advisers, government help) and all the (often technical / legal) info is available in your native language. Unless you can access those here, it may indeed help to get advice to start.

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Posted

I am a freelancer myself and as far as I know nothing of the above mentioned is 100% correct.

There are always exceptions/special regulations depending on the job you are doing etc.

The whole thing is really complicating, I dont think this forum can give "general advice"...

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Posted

Just trying to help a friend who can not afford a tax advisor.

It would seem to apply to an artist/illistrator who will be making just enough to survive, and each job being unique

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Posted

If your friend cannot afford a tax advisor, the best advice you can give him/her is to go to either the local Finanzamt, or to the part of the Arbeitsamt which deals with people setting themselves up in business (can't remember the name of that branch, and not sure if it still exists). Both of these places give FREE advice. It is basic advice, not detailed as you would get from a tax advisor, but certainly more detailed and correct than the misinformation posted by the OP at #1.

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Posted

I am a freelancer myself and as far as I know nothing of the above mentioned is 100% correct.

There are always exceptions/special regulations depending on the job you are doing etc.

The whole thing is really complicating, I dont think this forum can give "general advice"...

If your friend cannot afford a tax advisor, the best advice you can give him/her is to go to either the local Finanzamt, or to the part of the Arbeitsamt which deals with people setting themselves up in business (can't remember the name of that branch, and not sure if it still exists). Both of these places give FREE advice. It is basic advice, not detailed as you would get from a tax advisor, but certainly more detailed and correct than the misinformation posted by the OP at #1.

I'm the OP

See that is what I was after, people saying if it was right or wrong. Instead of saying oh but it is too complex, it can be right or wrong at an abstract level. Since you have classed it as misinformation, would you care to say how? if it is something like the humbers being of don't bother.

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Posted

Just trying to help a friend who can not afford a tax advisor.

From what I understood - which may be completely wrong - fees for steuerberater type guidance can be linked to income. So low earners pay less than bigger ones.

Those of us who work four ourselves really do have to think "big picture" in terms of income - what's best overall rather than the cost of a service per se. "Affordability" or "least cost" is not always measured in terms of the gross cost of a service (ie. just how much cash is shelled out). As others here have said, decent advice may well pay for itself in terms of allowances claimable and pitfalls avoided (ie. net income to you). Not to mention time saved through not having to plough through all the regulations and do it all yourself (and worry about whether its right).

Also one of the big advantages of being self-employed is flexibility. I know that, if I need an extra few hundred Euros, that - working for myself - I have the capacity and flexibility to do a bit more marginal work to earn it. I can work outside my usual field - in a cafe or a supermarket or whatever - if needs be.

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Posted

To be a freelancer, you can earn up to 10,000 without having to pay tax.

The first 7664€ that anyone earns are tax-free. That´s called the "Grundfreibetrag". It has nothing to do with being a freelancer.

To register as Freiberufler, which is a type of freelancer, you must show that each job will be unique and specific for each client. If you are a Freiberufler and your work is Geistlich(intelectual or requiring knowledge)you do not have to pay Gewerbesteuer tax. A job description such as a design consultant would qualify as this.

"geistlich" means spiritual - I think you want to say "geistig", but that doesnt help that much either. Freelance jobs are described in §18(1) EStG and in several related "Richtlinien" and court decisions.

If the "Finanzamt" recognizes your job description as "freiberuflich", then you wont have to pay "Gewerbesteuer". This is only easy if your job is specifically listed in the sources mentioned above. Otherwise you might need a tax advisor to describe it in a way, that will convince them (or tell you that you dont stand a chance).

The other option is to be self employed, which will require you to set up your own business, which is still very expensive for the most simple option.

Tax related you will have to fill out the same form as a freelancer. That form is complicated enough, that you might need a tax advisor. You will have to do a "Gewerbeanmeldung" in your community (filling out another short form). For some activities you need a permission (for selling alcohol for example). And I think you need to be a member of a Handels- or Handwerkskammer. Their fees depend on your income. Altogether it´s not that expensive but it is a bit more administrative work.

For both freelancing and being self employed, there is no requirement to pay MsWt(Equivilant of VAT) if your turnover is less than 17,500 per annum.

Of course you have to pay MwSt, if you buy something. But I think you want to say, that you can choose to be a "Kleinunternehmer" according to §19 UStG, who doesnt have to demand Mwst from his clients. Which is not necessarily an advantage, but that is something you need talk with a tax advisor about.

Some general tips: Do not ever charge tax seperatly, as you will be taxed on the tax you charge anyway, which would negate any benifit. For examle, if you charge $100 and $15 tax, you would have to pay $30 to the tax office.

I assume you are still talking about VAT in germany. I dont understand why it would be $(=USD) and why this strange numbers. If you charge VAT in your invoice, you will have to pay that amount to the "Finanzamt", even if you did so accidentally. If you charge 100EUR and 19EUR (19% VAT in germany), you would have to pay the 19EUR to the Finanzamt. If you charge 100EUR and stupidly write something like "MwSt inkl" on the invoice, you would have to pay 100/1,19 *0,19 = 16 EUR to the Finanzamt. If you dont charge VAT, you have to explain why, on your invoice. That would be either because you are a "Kleinunternehmer" or because of a number of other reasons, that only your tax advisor can explain to you.

In summary: talk to a tax advisor

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Posted

And I think you need to be a member of a Handels- or Handwerkskammer. Their fees depend on your income. Altogether it´s not that expensive but it is a bit more administrative work.

Usually yes, although fees with most IHK chambers don't depend on personal income, but company turnover iirc. Low turnover (below 50k?) might see your fees waived even.

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Posted

In summary: talk to a tax advisor

:D thats it!

there are always exceptions of the exception etc.

only a professional can give the right answers here...

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Posted

The first 7664€ that anyone earns are tax-free. That´s called the "Grundfreibetrag". It has nothing to do with being a freelancer.

"geistlich" means spiritual - I think you want to say "geistig", but that doesnt help that much either. Freelance jobs are described in §18(1) EStG and in several related "Richtlinien" and court decisions.

If the "Finanzamt" recognizes your job description as "freiberuflich", then you wont have to pay "Gewerbesteuer". This is only easy if your job is specifically listed in the sources mentioned above. Otherwise you might need a tax advisor to describe it in a way, that will convince them (or tell you that you dont stand a chance).

Tax related you will have to fill out the same form as a freelancer. That form is complicated enough, that you might need a tax advisor. You will have to do a "Gewerbeanmeldung" in your community (filling out another short form). For some activities you need a permission (for selling alcohol for example). And I think you need to be a member of a Handels- or Handwerkskammer. Their fees depend on your income. Altogether it´s not that expensive but it is a bit more administrative work.

Of course you have to pay MwSt, if you buy something. But I think you want to say, that you can choose to be a "Kleinunternehmer" according to §19 UStG, who doesnt have to demand Mwst from his clients. Which is not necessarily an advantage, but that is something you need talk with a tax advisor about.

I assume you are still talking about VAT in germany. I dont understand why it would be $(=USD) and why this strange numbers. If you charge VAT in your invoice, you will have to pay that amount to the "Finanzamt", even if you did so accidentally. If you charge 100EUR and 19EUR (19% VAT in germany), you would have to pay the 19EUR to the Finanzamt. If you charge 100EUR and stupidly write something like "MwSt inkl" on the invoice, you would have to pay 100/1,19 *0,19 = 16 EUR to the Finanzamt. If you dont charge VAT, you have to explain why, on your invoice. That would be either because you are a "Kleinunternehmer" or because of a number of other reasons, that only your tax advisor can explain to you.

In summary: talk to a tax advisor

Thankyou very much for your help. A tax advisor will be a necessity eventually, but now. Thanks again!

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Posted

Hello all,

Hope you can help me, ive been looking through all the different posts about freelance positions and im totally confused. If I just tell you my position then maybe I can get answer regarding tax and insurance etc. I am hoping to work as a sport scout, where I basically attend sporting events and report back to the company of what happened at those games etc. I am not married have no children or any dependants, will be living in Chemnitz in the next few weeks (currently living with girlfriends family). I registered yesterday at the Rathaus and got a yellow card with my tax number etc...but being a freelancer is a different ball game...what do I need to do? Im utterly confused. If someone could help me I would be extremely grateful.

Thank You!!

Dewi

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Posted

gerobach: what exactly is confusing you?

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Posted

DO i need or have to health insurance to work as one, what do I do about tax?

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