Freelancing in Germany - taxes, law, insurance

155 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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Posted

Okay...I am trying to freelance as an English trainer. I am a TESOL-qualified Canadian (yep...non-EU) who arrived in November and am awaiting that non-existent full-time contract. I am not working yet!

I am luckier than most though...I have someone who is supporting me as I try to break into this line of work. I have my Aufenthaltserlaubnis (thanks to my EU bf)and my health insurance...and a place to live. I have also allied myself with an 'old hat' English trainer who has been very helpful. I am slowly learning German but have a long way to go to become 'conversational'. I love Munich and I am committed to making this work.

I understood it would be easy to come here and find work. Just grab a TESOL certificate and on my way! However, this is not the case. No matter what qualifications or experience you have...there is someone out there who has more and gets hired instead of you. A positive attitude and enthusiasm gets you in the door but only that far. I have had several interviews so far but have not been lucky. Discouraging...but nevertheless...it has not sent me packing yet.

All the places I thought would be easy to freelance with are not hiring because they already have a full complement of teachers and/or their funding has been cut back. In-company training programs have also been cut back. Even VHS does not appear to be hiring.

In the meantime, some people have been referred to me through friends and I want to take on private clients. I have read the posts on here and on the ESL ezboard run by Target.

I am still confused...because my Aufenthaltserlaubnis states this:

Selbständige Erwerbstätigkeit oder vergleichbare unselbständige Erwerbstätigkeit nicht gestattet.

Hinweis: Arbeitsgenehmigungspflichtige Erwerbstätigkeit nur gemäss gültiger Arbeitsgenehmigung gestattet. Keine weiteren gültigen amtlichen Eintragungen.

Which I translated to mean:

Independent gainful employment or comparable dependent gainful employment does not permit. Note: Work permit-requiring gainful employment only in accordance with valid work permit permits. No further valid official entries.

So how can I freelance with this permit? Is it possible to get a regular work permit without having a letter from an employer? If you are freelancing with private clients then you are your own employer, non? The Target board told me that there is no such thing as a freelance permit ("There's no such thing as a "freelance permit": whoever told you that was certainly winding you up." and "Robert is quite right, there is no such thing as a "freelance permit".") I swear I read about such a permit on here and in the the-forum-which-shall-not-be-named survival guide (the old one...published June 2002).

I find this all very confusing (duh...am I in Germany?)!

I guess my question is what piece of paper do I need to teach on my own...and how do I get it?

Also, I understood the tax information mentioned and it makes sense. However, my boyfriend was told that because we are in a one-room flat he cannot claim it as a home office. Apparently offices do not have beds...who knew? ;) He has already claimed all of the technical items i.e. computer, DSL on his tax. I actually have nothing of my own. I will keep receipts for books and all other items though. And the German course I am taking. Can you keep business entertainment meal receipts for meetings with potential clients? It seems like all Germans like to meet in a cafe to discuss English training.

So you earn your money...then at the end of the year...you get a good English-speaking accountant and file your taxes.

One final thing, if you are freelancing, how do you pay the social security contributions on your own? It is my understanding that you need to do that.

Anyone who is non-EU and has been freelancing as an English trainer here...I would love to hear from you! I did lots of research before I came...and still feel clueless.

Thanks!

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Posted

Hi Blimeygirl,

Sorry to hear you are having such a hard time, but I'm not really surprised. It's getting better, but it's still pretty hard to get decent work as an English trainer. I get annoyed when people think they can just show up in Germany and start teaching English to fill their time, or do it as a year to slack off from a "real job". Not refering to you, but lots of others are like that. Now and late August-September are the times to really hit the language schools, as they have lots of new classes starting around these times.

Yes, you can get a freelancers visa. Here's what it says in my passport, (Cdn too).

"Selbständige Erwerbstätigkeit oder vergleichbare unselbständige Erwerbstätigkeit nicht gestattet. Ausnahme; selbständige Tätigkeit als Englischlehrerin gestattet. "

The exception is that I can work for myself as an English teacher. I had to go into the Kreissverwaltungsreferat with a copy of my qualifications and a few other things. Get someone to help you phone them to ask exactly what you need, as I can't remember, stuff like the last 3 months bank statements to show you are earning money, copy of your insurance and pension plan, etc etc.

You won't get a full-time contract as an English trainer in Munich, except possibly at Wall Street or Cambridge Institute. Least they were the only ones who hired full-time a few years ago. Can't say about nowadays, but good luck to you.

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Posted

@ Blimeygirl

I was also not allowed to work freelance and had that exact same wording forbidding me to do so. What you need to do - and I would encourage you to do this ASAP, is go to the KVR ausländeramt and tell them that you want to become a freelancer. They will give you forms to fill out, etc. Basically, you have to demonstrate to them that you will be able to do the type of work you want to freelance as. Be prepared to show any qualifications you have - also, if you have any offers to start working, or anything that even hints that they might like you, bring it along. Once you've done all that, then the paperwork will be sent somewhere else for processing (can't remember where now, but not really that important). They told me my processing time would be about 6 weeks - actually took about a month longer than that. You then receive a temporary permit for 6 months. In that time, you have to get yourself some kind of pension plan and medical insurance (there might have been something else, but again I can't remember - they'll tell you anyway). Do not - under any circumstances - choose the government run pension scheme if it's offered. It is a financial black-hole. Take something private, where you'll actually get a return on your money. Once you show them everything, you'll get a new stamp, allowing you to freelance in your chosen field. Basically your stamp will still say that you can't work freelance, but will list exceptions. I can work in IT or teach English - so you can go for multiples.

It's a bit of a pain in the arse, but it's definitely a process you should get started as soon as you can, because until you receive the first confirmation, you will not be able to freelance legally.

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Posted

BlimeyGirl, what Hazza said--if you've got the teaching certificate, a lease with your name on it (or letter from your landlord) and proof of health insurance then you can probably get permission to freelance.

I'm doing that now and my Aufenhaltstitel says what showem's says and also:

Ausnahme: Freiberufliche Tätigkeit als Englischlehrerin.

So there is indeed a freelance permit

I think the only thing I had that you don't is a "contract" from the school where I'm teaching (sorry, showem) that says I'm freelancing and how much they're paying me per hour.

Good luck.

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Posted

Well it seems they pulled a fast one on me. I put English trainer on the application and we told the guy at the KVR that I would be looking for freelance opportunities as well as full-time work. He told me to send a copy of the work permit information to him when I got it. That was it...there was no mention of putting an exclusion in my residence permit. Howver, I was under the wrong impression...I thought that the 'freelance permit' was a work permit and not something included in the Aufenthaltserlaubnis. Thanks to TT for clearing that up!

I am berating myself for not being more prepared, not knowing enough German, etc. But I guess it doesn't matter anyway...you don't get to see what the put on your permit until you pick it up at that last counter. Of course it is all in German and you have to go home and translate it. And if I have been told once I have been told a thousand times...it can depend on who you get behind the desk at the KVR so to speak. This is my fancy system for learning anyway...the hard way :blink:

Anyway, now I know. I have to go back and sort this out. Get my permit changed to read what Michnic's does...as I want to be able to freelance on my own as well as at schools. I understand that with a school you will get a letter saying they are offering you the work...so that would be helpful for the trip to the KVR. Either way I will get it sorted...I have the qualifications, health insurance, and my residence permit already (valid until November 2004).

Wish me luck!

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