Freelancing in Germany - taxes, law, insurance

168 posts in this topic

Posted

Does anyone have any idea how a freelancer goes about navigating the maze that is the German tax system?

 

Is it true that you don't pay any for 2003 if you arrived in D-land after Jan 1st?

 

Do you have to register anywhere when you start freelancing?

 

I know about keeping receipts and writing off every possible expense as work-related (gin helps me 'think'), am just not sure about how to get started.

 

(And before someone suggests I just don't pay it, I have to - I believe in sod's law and anyway, dodging tax is baaaad, mmmmmkay? Just ask Boris Becker.)

 

Advertising link by admin: German taxes - English language advice

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Posted

Here is a link a friend found for me. It has some basic info on self employment in Germany

 

Working in Germany

 

I am also a freelance without a clue and a little overwhelmed by the tax system here. In this document they also suggest professional help.

 

My main concern is how to set up a bill/invoice. Are there eny examples anyone could provide??

 

Specifically what tax should I charge (VAT, Umsatzsteuer...)? :blink:

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Posted

Kiwi, the company that you are contracted to should be able to provide information about a suitable invoice layout. For example, the company I am with require itemised timesheet & project code information on each invoice, whereas others I have dealt with only require totalled information.

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Posted

Hi Everyone,

 

I'm a new member here to Toytown and this is my first post. I am specifically looking for information regarding freelancing here as a Graphic Designer. I see that there was a similar post earlier from a musician, but nothing really got resolved there so I had to post my own. Anyhow, my question is this.

 

What do I need in order to freelance here in Germany? I'm an American citizen, have been here about 6 months and working as a freelance designer with my old American firm. I will be doing illustrations as well (probably not really relevant) and need to know exactly what needs to be done.

 

Do I need a Rentenversicherung? I already have health insurance from a private company, so at least THAT is resolved. Try as I might I can't find anything about this on the internet, I've even called the American embassy in Frankfurt AND Berlin, as well as the German embassy in Los Angeles California AND San Francisco! So I've been doing the legwork but still am banging my head against the wall.

 

There is a "Kunstlersozialkasse" (Artists Social Program) in order to save money (I guess). Do I qualify for that? Is there anyone here who knows anything about freelnacing in Germany? The bureacracy here is well... hmmm... a bit frustrating.

 

Thanks for your help!

 

Your Newest Member

Frito :)

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Posted

Hi Frito,

 

don't quote me on any of this because I am no expert. But having stumbled my way through the German tax maze here is what I understand to be the case:

 

as a freelancer you are only obliged to pay three taxes, namely income tax (Einkommensteuer), solidarity tax (Solidaritätszuschlag) and VAT (Mehrwertsteuer). The VAT is only to be paid if you earn more than 17,000 Euros a year.

 

There are 4 more taxes that regular permanent employees pay, these are:

 

Krankenversicherung - health insurance

Pflegeversicherung - nursing insurance (usually bundled with heath insurance)

Rentenversicherung - retirement insurance

Arbeitslosenversicherung - unemployment insurance

 

As a freelancer (Freiberufler) however you are NOT obliged to pay any of the above 4 insurances. Of course it is wise to pay health insurance, otherwise medical emergencies might not be paid for. But you don't have to pay this. Retirement and unemployment insurances you probably shouldn't worry about if you don't intend to either retire or go unemployed in Germany.

 

Oh, and one more. If you're a bible thumping type then there is church tax (Kirchensteuer). But no one bothers about that BS do they?

 

Like I say, this is my understanding. I'd be very grateful if anyone else can either confirm or challenge what I've written.

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Posted

Thanks for the help. I thought health insurance was required as well, but even though it's not I have it and I think it's wise to. Is anyone out there actually freelancing in one form or another? The amount of money for everything the state wants just seems to be so exorbitant I need to find out exactly what it is I need to get. And even though there are about a billion web sites out there, I haven't been able to get actual answers to these questions no matter how many different seach strings I put into Google.

 

Thanks again for your help and if anyone else out there can add to it I would be greatly appreciative.

 

Frito

 

---> :blink: <--- Me after all this Tax/Insurance crap

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Posted

Frito,

 

I'm freelancing as an English teacher and I'll tell you the reason you're having a hard time getting information is because it's so different for each case (as with everything in Germany).

 

I've just been informed that the American Consulate in city center (Koeniginplatz, I think) provides free information and help with tax issues to expats. Haven't looked into it yet, but that's worth a shot.

 

And you're going to need that help from someone who's in the know and as well as fluent in German. You must get a form from the Finazamt--“Fragebogen für Gewerbeanmeldung - Anmeldung einer freiberuflichen Tätigkeit

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Posted

Yep, Michnic's right. You need to fill out one of those "Fragebogen für Gewerbeanmeldung - Anmeldung einer freiberuflichen Tätigkeit" forms (what a flippin' mouthful!). And this form (as with all tax forms!) you can get online here:

 

http://www.steuer.bayern.de/vordrucke/17_sonstige_selbst/Fragebogen_Anmeldung.pdf (watch out, it's a PDF)

 

Basically all your forms and info is online here:

 

http://www.finanzamt-muenchen.de - admittedly only in German though.

 

Oh, I just realised you're not in Munich!!! Oh, well, I'm sure there's an equivalent for Wuerzburg, wherever that is.

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Posted

 

(watch out, it's a PDF)

maybe something completely off-topic, but why should you watch out for PDF's...?? :huh:

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Posted

Because you can innocently click a link assuming it's gonna be a perfectly ordinary webpage but then your computer locks up for a billion years and your harddrive goes mental whilst it tries to launch Adobe Acrobat. I dunno, maybe my computer is just ancient. But I really fret with impatience everytime Adobe starts up. Is it just me or does it take like a year to load each font? And then does everyone have 200 fonts to load? I just don't understand why they don't make it so that PDF loads as fast as HTML. How difficult can it be?

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Posted

Whereever Wuerzburg is?? I'm not that far from you, about 4 hours north, an hour and a half or so east of Frankfurt.

 

Anyhow, thanks for all the info guys! You rock! In case anyone else goes cruising around for this sort of info, I had a native German speaker call the BfA in Berlin and they have an automated recording that says if you are part of the Kunstler... whatever you call it, thing and can be in this program then you don't have to pay the Rentenversicherung, Health Insurance, etc. etc. like Lottie said. You still pay taxes, but you don't have to take part in the insurances.

 

I am not really sure why Artists are singled out for a specific program to be exempt, but that's the case I guess. BUT! If you are a freelance Graphic Designer (or commercial artist I expect) you MUST work for more than one company otherwise they consider it as if you were an employee of that one company and then you get to pay the whole gamut of insurances, taxes, etc.

 

You have to make at least 20% of your income from more than one source. For example if 81% of your income is from one company, well, then you get to pay everything, 79% and your golden. That's just in case anyone else stumbles across the same problem I had.

 

And thanks for the info on the forms and the Finanzamt, I'll check it out. Germany has a flair for red tape and bureacracy don't it?

 

Again thanks all y'all for your help!

Frito

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Posted

That's handy, I was just about to start a thread asking about contract work, and here is one...

 

My position is this: I'm setting myself up as a writer. That means I will earn bog all probably for the rest of my life. In the meantime I am taking small contract work - consultancy stuff - for the firm I used to work for that is based in Munich.

 

I work about 6 hours a week and get around 500? a month for it. Enough to pay my Health and Pension and buy a beer or two - my darling wife takes care of all the boring stuff like rent, food, bills, bills and more bills.

 

If the contract lasts till the end of the year, I would earn about 6,000? from it. Other work I have lined up (odd articles to be sold; some English teaching and so on) will probably push this amount up to the giddy heights of 10k or perhaps at most 12k...

 

So here (at last) is the question: When I submit an invoice to the firm taking the consultation from me, do I HAVE to charge VAT?

 

In England I know that the thresholds would mean I don?t HAVE to if I don?t WANT to. But I am not sure about Germany.

 

Also I was going to save my tax return for the end of next year - as I did in the UK - and the fill out all my incomings and outgoings and declare my tax liability. From what is being said here I have to register with the tax office and pay a monthly fee up front based on what I am earning... Is this correct? Or can I qualify - as I did in my first year of contracting in the UK - for a tax holiday for the first year.

 

Not sure why they called it a holiday because you still paid for it at the end. I supposed because you don?t have to worry for the first 11 months and 3 weeks and 4 days...

 

Anyone got any help on this, or some links (preferably in English) I would really appreciate it.

 

Paul

 

www.paulekert.com

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Posted

There are a few simple rules to follow:

 

To run a business (i.e. writing invoices from a German address), no matter how small, you must have permission to live and work in Gemany. Members of the EU have an automatic right to this, but only if they can prove they have, or will have an income they can live on (or someone to support them) and have sufficient health insurance. In fact the health insurance is not stricly necessary but those nasty people at the "Foreigners office" get very awkward if you can't prove it. None-EU members have to turn through larger hoops to get this permission, depending on nationallity.

 

Once you are legally living here you need to register your "business" ("Gewerbeanmeldung") - a simple formallity at your local Rathaus, although I believe for small amounts (under €6,000 a year?) you don't need to do this, so long as you declare it in your annual tax return, or that of your spouse. Note that forup to €400 a month you can actually take employment with a company without being hassled for any tax or insurance, even if you have another job or income.

 

If your *turnover* was less than €16,620 in the previous year and is not expected to exceed €50,000 in the current year you don't need to register for VAT (MwSt). However if you do (under these amounts it's voluntary) then there are advantages in that for everything you buy for business use you can reclaim the MwSt paid - this means 16% discount on most purchases. Disadvantage here is more paperwork to monitor income and outgoings, and VAT returns to complete each quarter.

 

If your turnover is less than €61,356 in a year, for certain professions you can simply apply standard VAT rates to your turnover to simplify the returns process.

 

Starting a new business attracts a number of grants, tax advantages and other benefits such as interest free loans, especially if you are moving off the unemployment register to start afresh.

 

The main, and most important rule is don't listen too much to other peoples "advice" unless they are professionals (and I'm not, so treat the above with a pinch of salt!). Employ an adviser ("Steuerberater") to help you and defend you against the authorities. A good one is not cheap, but worth every penny.

 

Good luck - you'll need it. I've done this a number of times, with both large and small companies. It's not easy, but it is satisfying if you succeed...

 

YorkshireLad6

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Posted

Well thanks for all that lot. You might not class your self as a Profi, but a brief conversation with an actual Steuerberater confirmed pretty much everything you have said here.

 

My decision then will not be to avoid registering for VAT. I cannot see myself buying too much this year and as such I wont need to claim VAT.

 

Anyway, thanks for finding out the threshold values for me. Sterling stuff, I owe you a pint.

 

Paul

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Posted

I think registering for VAT is a good idea - once self employed there are no end of things you can buy - furniture for the "office", PC, car (!), books, etc., etc., all of which will get you 16% returned from the taxman. Even if you earn €5000 in the first year and have expenses of €30,000 (don't forget that car!), you still get the 16% content of the €30,000 back... Once registered for VAT you can also get VAT-free imports from other EU countries - e.g. stuff from the UK...

 

Even the pint you plan to buy me get's 16% cheaper (business entertainment!).

 

After 2-3 years, (3 years is good, as that's the write-off period for many high value things) simply declare it all a dead loss and wind the company up...

 

The downside is the additional paperwork, but it's no big hassle - just a form to fill out once a quarter showing your income and outgoings...

 

Think about it...

 

YorkshireLad6

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Posted

Does anyone know if you need to declare your intention to freelance to authorities here (Finanzamt)? I have been a freelancing designer for awhile now and now my wife thinks that I need to somehow let someone know that I'm doing this before taxes come around. I thought this would all be taken care of at tax time, but then I have NO clue. Anybody have info on this? Germany is so loaded down with red tape that I can't really find any info.

 

Thanks!

Frito

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Posted

Get s steurberater. If you are a freelancer he will save you more tax then his fees will cost you, and he will keep you on the straight and narrow.

 

Ot if you're like me, use his contacts in the Finanzamt to avoid having you cald in irons for always being late.

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Posted

Frito, the answer is a resounding YES. The sooner, the better.

 

See Lottie's links above for the forms.

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Posted

Thanks everyone for your help. Very useful to have people who've gone through this (or something similar) to speak to. Especially in English!

 

:)

Frito

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