Are IT freelancers self-employed or a business?

Hi I have been 'selbststandig' as a website developer here in Berlin for 3 years. Now the finanzamt is suggesting I may be liable as 'gewerbe' and have to pay business tax. Can anyone explain the difference to me? I am used to being a freelancer in england where the issue never arose. I understand that it is something to do with performing a 'skilled trade' and having a an educational qualification in the field (although I can't for the life of me see why people who didn't get a formal qualification should be forced to pay business tax).
One thing that happened in the last year is that I did a job where I had to subcontract a small portion of the work to a graphic designer. Not sure if this makes a difference. In any case it was an exception and the first time it has happened in years. Normally I just work directly for clients and invoice them for work which is entirely my own.

any advice on how to approach this would be appreciated.

do you mean VAT?

although ultimate, i would suggest speaking with your tax advisor.

I guess you are talking about the difference between a "Freiberufler" and a "Gewerbetreibender" (both are "selbständig" btw). The status of a "Freiberufler" is only applicable for a defined list of jobs (and some jobs who are at least comparable). You explained it quite well. A Webdesigner should be a normal "Gewerbetreibender" and therefor pay business tax ("Gewerbesteuer"). The only chance to avoid that would be, if you could claim to be an artist. Maybe if you studied design...


There is a discussion if this differentiation between "Freiberufler" and "Gewerbetreibender" might be against the principle of equality, but until now this regulations are still valid.
Some arguments why "Freiberufler" should get an advantage:
- "Freiberufler" do jobs that are especially important for society, (physician, lawyer, artist, journalist, teacher, engineer, tax advisor, ...)
- they have to invest a lot of money and time into their education,
- they are highly specialized and cant be expected to spend as much time on business activities as a normal businessman


Well it´s not that important, as it happened only once. But it doesnt support your claim to be a "Freiberufler" because you obviously needed the help of a specialist when it came to the "artsy" stuff.

Speak with your tax advisor.

Thanks for the replies. No I'm not talking about VAT but the Freiberufler/Gewerbetreibender issue above.
It seems a bit outdated to me to say that some professions like 'engineer' are good for society but being a 'web programmer' isn't. I also find the idea wrong, that having an official diploma automatically means I put more time and effort into my education. I do a specialist job. How I educated myself shouldn't be an issue.

Anyway. I'll look more into it and maybe contact a tax advisor as suggested. Thanks.

Nobody said that tax law was fair, it's simply the case that the professions are included in a list and if you're self-employed and your job is not on the list than by definition you're "gewerbetreibend".

The law probably seemd at lot fairer at the time that it was written, but Germany isn't the only country where the law lags a long way behind modern reality.

To tell the Finanzamt that you think the idea is wrong won't work very well (which I think you know). There is a legal difference between Freiberufler and Gewerbetreibende. To make a legal difference, you need some reasons.

Yes, you are right that you could have put in as much time and effort into learning to do what you do. But a university diploma can be measured. If you can show certificates, courses and things you did, that might help to prove that you have invested the time into your specialist field.

It won't help you to say that the regulations are wrong. You will need to show yourself and your profession as something which fits with the regulations.

I also think this might not be so easy if the Finanzamt makes a decision to make you a Gewerbetreibender. A tax advisor might make all the difference because he will know how to formulate your status to make it acceptable to the Finanzamt.

Good luck.

This dude specializes in exactly your situation:

http://www.steuerschroeder.de/freiberufler.htm

Yes I agree that moralistic arguments won't help, but just thought I'd make the point.
I am going to contact a tax advisor and hopefully he will clarify how I should address the issue.
From what I understand, a lot of programmers or web developers do actually work as Freiberufler so there must be a way.

Thanks KäptnKnitterbart. He's actually the one I just contacted.

This recently happened to me and after putting some paperwork together to show exactly what I did the Finanzamt backed down. I'm registered as a Systems Programmer with them which comes under the heading of engineer whereas an Applications Programmer doesn't. The Finanzamt have a set of rules which determine whether or not you you have to pay Gewerbesteuer or not and I would expect that a Web Developer would come outside of those rules because you are set a task to do which has a predefined set of objectives. (The degree thing doesn't really count as I have bugger all but years of experience.) You really need to speak to a professional about this as its quite a grey area.

I was 15 years freelance in Munich in IT and was never registered for Gewerbesteuer. My accountant had me down as a software "engineer" and there was never any hassle. If they see the word engineer that's normally enough for them and they can give it a stamp....

Yes, that's true, but don't forget that "Ingenieur" is a protected title in Germany, you can get into big trouble for calling yourself an "Ingenieur" without the appropriate qualification, such as Dipl. Ing.

However, "engineer" is not a protected title in the UK* (depending on your point of view, perhaps unfortunately), so if you have any documentation showing that you were working / employed as, for example, a "Software Engineer" in the UK, then you could just use the same title here and give it a try, who knows, you might get lucky! As darmstadt and Corcaigh imply, some German Steuerberater are pretty good at shading things so as to get the desired response from the Finanzamt - a good Steuerberater is worth his weight in Gold here!

*Before any of our American friends get their knickers in a twist, "Profession Engineer" is very much a protected title in most States in the US!

Hi Darmstadt. could you clarify this? It may be what I need to focus on to explain my status to them.

Also, on the subject of having a degree, I actually studied for a MSc in Computing but for one reason or another didn't get the qualification. Not sure whether this would make a difference..