Freelance language teaching in Germany

Info on taxes, tax numbers, visas, permits, etc.


ProChiller82
How to become a freelance teacher in Germany - personal experience and advise

Hello everybody, this post is supposed to give information to people wanting to come to Germany and start out earning money on a freelance basis.
I have been doing quite a lot of research on the internet to find out what exactly you need to do if you want to become a freelancer, in specific a freelance teacher, in Germany. My wife is American and I am German so I was able to check websites in both languages. I also came across Toytown and I noticed that even here there isn‘t too much detailed step-by-step information available about this topic. So after having talked to pretty much every authority that might have remotely something to do with a foreigner taking up freelance work I would like to present our way and what we found out to make things easier especially for other foreigners coming here. As a German I understand our bureaucracy might seem strange and confusing to new foreigners as it even does to me sometimes. Take this information as what it is - information - since I‘m not an immigration officer or something like that.

First of all you need a visa (called Aufenthaltserlaubnis) that will permit you to work. Since my wife and I are married that was not really a problem. For people planning to come here, be advised. There have been major changes in immigration laws in recent years, so do research on this topic before you come here. New rules are applied such as proving language proficiency, employment opportunities, etc.. There is a certain list of countries such as the US, Australia and Canada that allows citizens to come here on a tourist visa and then convert it inside the country. That would allow you to come here, look for work and when you have a job offer written down on paper you can present that to the immigration authority (Ausländerbehörde). You will also need to prove that you have health insurance. More on that topic later.

After you got your visa you need a tax number to work as a freelancer. When you register for residence most likely you will get an orange tax card with your tax class (determining how much taxes you have to pay) written on it. This is only good if you are being employed by someone. If you choose that, you need to give your tax card to your employer and they will do the rest. To be a freelancer you need to register with your local Finanzamt (IRS, Financial Authority, Finance Office,...every country‘s got them). First you need to find out which one is in charge of you. Every district or community has a Finanzamt that‘s in charge of everybody living there. If you don‘t have your own office find the Finanzamt for the district you are registered in. If you want to be fancy and have your own office then find the Finanzamt that‘s in charge of the district your office is in. Most Finanzämter have their information posted online, so you might be lucky by using google. If you live in Hamburg in the district Wandsbek you could try typing „Finanzamt Wandsbek“ and it‘ll show you where it is, when it‘s open, etc...

When you know where it is you have 2 options to register, either by mail or in person.

If you choose to register by mail write them a letter saying you want to work as a freelancer in whatever you want to do and you are requesting a tax number („Ich möchte einer freiberuflichen Tätigkeit [enter what you want to do,e.g. Sprachlehrer - language teacher] nachgehen und bitte um die Erteilung einer Steuernummer.“). Make sure your address is in the letter and finish with „Mit freundlichen Grüßen,“ and sign. Sooner or later you will get mail with a form to fill out. If you want to speed things up you can download that form from the internet and put it in your letter as well. Google „Formular AO 14 Fragebogen zur steuerlichen Erfassung“. From my experience it‘s the same form for all states in Germany.

If you choose to go to your Finanzamt in person you will have to fill out the same form. Either you can download it and fill it out at home or they will give it to you there. I would recommend to fill it out at home and to bring it there in person. That way you are sure that you did not miss a question and that everything will be processed. Nothing is more frustrating than hearing after 3 weeks „We‘re sorry to inform you that your request cannot be processed. We need the following information...“.

This form is not available in English, so if you do not know someone that‘s fluent in German I am providing a brief explanation of what they are asking:

Check on top of the form „Aufnahme einer gewerblichen, selbständigen (freiberuflichen) oder Land- und forstwirtschaftlichen Tätigkeit“

Section 1 - general information about yourself, where you live, what type of job you have right now, if you‘re married, your address, passport number, etc.
1.2 information about your spouse
1.3 information about your kids that are inside the country
1.4 bank information for automatic transaction - I would recommend to check the first one („Alle Steuererstattungen“) - that means that all tax claims and returns will be automatically taken off / transfered to your account. This will keep you from fines for paying late or running after them to get your money. Enter your acccount number, your bank number, the name of your bank and who owns the account. Check line 18 yes and fill out the permission for automatic transaction (form A 104 V / 2 - Ermächtigung zum Einzug von Forderungen mittels Lastschrift) - they will hand it to you when you turn it in or google the form name I stated before
1.5 if you have a tax consultant check yes and hand him/her this to fill it out for you. Everyone else check no. However, I do recommend paying a tax consultant when you do your first tax declaration. There are so many rules and loopholes in the German tax system that it really pays off to have one. And the best part is tax consulting is tax detuctible for most people.
1.6 fill this out if you want someone else (a partner or something) to receive mail that relates to your taxes from the Finanzamt
1.7 information about yourself - if you moved to this district in the last 12 months put in the date when you registered here into the field on the left and your former address into the field on the right. Line 24 asks if you or your spouse have been registered for taxes in the last 3 years - for most of you that should be a no, if yes then state your former Finanzamt and tax number

2.1 most important field, state the job title you want to do, this will determine if the Finanzamt makes you a freelancer or self employed person. If you are marked down as a self employed person you have to pay a „turn over tax“ (Umsatzsteuer, I‘m not sure if there is a difference to sales tax). If you are a language teacher you will automatically be a freelancer, which means you will be self employed but do not have to pay that tax and file a new business (Gewerbe) and for a business tax number. Write down „Sprachlehrer - Lehren der englischen Sprache“ (Language teacher - teaching the English Language).
2.2 if you have your own office write down the address here, otherwise leave blank and they will automatically make your home address your office address
Leave everything blank until 3, your Finanzamt will understand, because those fields are related to businesses (if you are running business in other states, if you are filed with certain associations, etc.) If for whatever reason they mail it back to you check „nein“ everywhere, although that really should not happen.

3.1 estimate your income - you are the „Steuerpflichtiger“ (taxpayer), in the left column estimate your total income for the year that you are starting to be a freelancer and write that number in the line that says „Selbständiger Arbeit“. The right column is for the following year, thus your total income should be higher. Write down your estimate again in the line that says „Selbständiger Arbeit“ under „Steuerpflichtiger“.
3.2 asks for additional costs and how much taxes you are estimate you have to pay. If you have your tax card find the field that says „Lohnsteuerklasse“ and write in „Steuerabzugsbeträgte“ your „Steuerklasse“ whatever you have, if you are not married with no children you should have tax class I.

4 now they want to know how you would like them to do your taxes, unless you‘re a farmer you can only choose between „Vermögensvergleich“ which means something like „capital comparison“ or „Einnahmenüberschussrechnung“ (welcome to Germany, these are 3 words in one and mean IncomeSurplusCalculation). I would recommend to check that. This means that at the end of the year you tell the Finanzamt your total income and your total expenses. The difference will be your profit and that is the money they will tax. The beauty is that if you have a tax consultant you can file lots of additional expenses that will minimize your profit that will be taxed. Line 52 check nein, they are asking if you have a business year that differs from the calenderyear - e.g. if you own a really big business that does their yearly calculations in july instead of the end of the year, if that‘s the case I don‘t think you would be reading this.

5 - 8 are asking for business related information that you don‘t need to provide as a freelancer. So state your location and date on the bottom and sign next to it.

I highly recommend to fill out this form at home and to take it to the Finanzamt in person. As I said before, if anything is unclear to them they can ask you on the spot and you can be sure that everything will be processed correctly.

If you made it this far, congratulations. This means you are all set to be a freelancer. Remember to do your tax declaration as soon as a new year starts because that way you will also get your tax return sooner. If you have any problems talk to the Finanzamt. If they don‘t hear from you they will estimate your income and tax you that way. I heard that a lot of people neglect to even pay taxes since they only plan on staying here for a year or less. I do not recommend this because if you work for any serious company chances are that they do their tax declarations and tell the Finanzamt that they had to pay money to you. So even if you don‘t talk to them they will know that you made money. They are also aware that things are complicated and hard to understand, especially for a foreigner. So if anything comes up, find someone that speaks German and get in touch with them. You do not want the person that calculates your taxes to get upset with you.

The last 2 important issues for foreigners here is insurance. To get a work permit you need health insurance. You can do this either through state/government controlled insurance or private insurance. This is a decision you need to make for yourself. If you choose to take state insurance your rate will most likely be around 300 or more euros a month and benefits are by far not as good as private insurance. You will have a basic coverage that will make sure you‘re good, but no fancy extras. Doesn‘t sound like a good deal, however if you plan on staying here for a while and maybe have more than one kid this might not be a bad deal after all. Family members with no income are insured for free if you are in state insurance. So even if you paid 100 euros more than in private insurance it would pay off if you had kids, because those need a separate coverage in private insurance. I do not know to what extend this applies to freelancers, but state insurance runs on your income. If you choose not to be a freelancer anymore your rate will be calculated differently, e.g. your spouses income divided by 2 and off that 14% or whatever their rate is. If your spouse is in state insurance you would be a direct family member that would be eligible for free coverage if you had no income, so then you have no worries at all.

The other option as stated before is privat health insurance. They pay doctors better so you will be treated as a first class patient. Your monthly premium will be calculated by age and sex, not by your income. This is the big difference between those 2 different types. If you are self employed (freelancer) they will most likely provide a good basic coverage for less than state insurance. Keep in mind the benefits of state insurance and make this decision on personal plans. If you do not plan to have kids or to stay until you‘re 55 and older you will almost always be better off with private insurance. Private insurance also runs differently.

Most of them have a yearly co-payment. Let‘s take a co-payment of 300 euros per year as an example to compare both insurances.
State insurance has no co-payment, for every quarter year you pay an initial 10 euro doctor fee when you see a doctor the first time. They give you transfers to different doctors that you can see for free them. That‘s it, no more of your money involved.

Private insurance does not have that doctor fee. The doctor will mail you a bill that you need to pay. After you paid 300 euros per year (any costs, medicine, doctor bills, whatever) the insurance will kick in and pay whatever your plan covers. So any medical bill you can then hand to the insurance which will reimburse you. The beauty of private insurance though is that they don‘t want to talk to you but make money. So if you don‘t contact them with any bills they will reimburse you for that as well. Most insurances will pay back a 3 month premium at the end of the year if you haven‘t had them pay any bills for you which will get more and more for however many years you don‘t bother them. So back to our example, it‘s december, you spent 300 euros and now you get another dentist bill worth 120 euros. You could file it in or you could choose to pay it yourself. If your plan has a 3 month premium reward then this would mean the insurance would pay you e.g. 600 euros for not having contacted them, meaning even if you pay the 120 euros you are still better off. I estimated a monthly premium of 200 euros for very basic coverage. Get the idea?
To find the right insurance plan for you I recommend to find an independent insurance broker. If you have no idea how and where to find one, contact me (no I do not work for insurances). They don‘t get paid by one insurance but rather get a commission from whatever insurance they make a contract with between you and them. So they get paid no matter what they recommend to you and will most likely pick a plan that will suit you best.

Last part you should consider is social security. Social security is mainly for employed people but also for certain groups of freelance jobs that require "special attention" from the government. Unfortunately teachers are listed in there, which means you need to talk to the „Deutsche Rentenversicherung“ as well. From what I read on their website Germany has social security agreements with a bunch of other countries so you would not pay in for nothing. I also read that you have 5 years to tell them what you are doing and for them to figure out if you have to pay or not. Just as information. If they start investigating they can claim social security / pension payments up to the date when you started doing something which required you making payments to them. E.g. you start working as a language teacher in 2003, but don't tell them until 2005. It's possible for them to not just make claims up to the date when you contacted them but up to when you started working. There are discussions in other forums about foreigners working here as language teachers having to pay this. If you want to look closer into this I recommend the following link: http://elt.yuku.com/forums/9/t/The-Pension-Problem.html .

Okay, this is my „short“ introduction on how to become a freelance teacher in Germany based on personal experience. If you have anymore questions feel free to email me, I‘ll be glad to help. I‘d like to point out again that I‘m a private person, no lawyer, government representative, what so ever, so I‘m providing information, not rights or something else. I hope this made things easier for you guys just wanting to get started here. If you have any questions or comments on this feel free to contact me.
Starshollow
Great overview - maybe a major part of it should be turned into a WIKI even here on on Toytown?

With regards to the health insurance issue: there is a decent WIKI about this here on Toytown (check the 2007 version) which is a bit more detailed with regards to this very complex matter -but then you said yourself that you are not an expert for that.... Your comparison between public and private health insurance leaves out a couple of important other factors, such as health condition as well as if someone coming into Germany is eligible for voluntary membership in a public health insurance at all. And then there are the special Expat and International health insurances which can provide many Expats with an easy and inexpensive start... but if a new arrival gets in touch with an independent broker, you are right, then he should get all this information and more.

You also left out some other important insurance issues, such as liability insurance (both private and professional) and, from my point of view also very important, so form of income protection. New arrivals can find a lot of info about all this by using the search function here on Toytown - or getting in contact with an independent broker, some of which are actually advertising here on Toytown and who are specialized on Expat matters (many German brokers will not entirely understand the individual needs of Expats, though).

Once again, great effort, am sure many will appreciate that...

Cheerio
Freising
Great work. I agree with SH it should be made into a wiki on TT, so one could add information. I dont know enough about insurances, but tax related I see the need for a few remarks:

2.1 most important field, state the job title you want to do, this will determine if the Finanzamt makes you a freelancer or self employed person.
I agree, but your next sentence is based on a misconception. It doesnt change the way you fill out this field, but it might confuse people who are not working as teachers.
If you are marked down as a self employed person you have to pay a „turn over tax“ (Umsatzsteuer, I‘m not sure if there is a difference to sales tax).
Are you confusing turnover/ sales tax/ VAT (= "Umsatzsteuer") with business tax (="Gewerbesteuer")? Because that would be true - a freelancer doesnt have to pay "Gewerbesteuer".

Or maybe there is a misconception of a different kind. The service some sort of teachers (teachers who do freelance work for an officially accredited school) provide are VAT-exempt (§4 Nr.21 b UStG), but this hasnt anything to do with their status as freelancer ("Freiberufler"). Many freelancers have to deal with VAT. (tax advisors for example) In fact I think, if someone would work as a freelance language teacher on his own instead for some school (having contracts with companies to train their employees for example), he would have to deal with VAT (unless his turnover is so small, that he would be considered a "Kleinunternehmer").

4 (...IncomeSurplusCalculation...) The beauty is that if you have a tax consultant you can file lots of additional expenses that will minimize your profit that will be taxed.
You can alway subtract your business related expenses for your tax advisor, no matter what way you are calculating your profit. Ok I admit, this is just nitpicking on my part. I agree that a language teacher should pick "Einnahmenüberschussrechnung".

5 - 8 are asking for business related information that you don‘t need to provide as a freelancer. So state your location and date on the bottom and sign next to it.
If we are talking about a certain type of language teacher, the Finanzamt will probably not mind if you leave out this information, but otherwise you´d better talk to a tax advisor. I tried to write something about section 7, but it got so long and complicated, that I had to give up. It would create confusion instead of being helpful. Just a few terms that are important and have shown up in other topics:
- Kleinunternehmer gem. §19 UStG
- in Deutschland nicht steuerbare Umsätze: if you are doing certain kind of work in germany for a non-EU company, for example translations, this work might not be relevant for german VAT
- Steuerbefreiungen: VAT tax exemptions

This and this are official websites where you can find all kinds of tax related forms.

Here you can find the form (pdf) PC82 mentioned. (link might not work - for some reason they think it´s a great idea to work with Session IDs)
Small Town Boy
I created the Freelancing in Germany wiki page about six months ago but haven't gotten around to actually putting any information in it yet.
ProChiller82
Thanks for all the remarks so far, maybe we really should make it a wiki page, that way everyone can contribute their experiences. Freising, yes I did confuse the two taxes, I had no idea what you actually call them in English. So to make it clear, as a freelancer you do not have to pay the "Gewerbesteuer", which is also the reason why you do not have to file your own "Gewerbe" (business), it saves you from going to another authority. From talking to the Finanzamt though and from reading the law on this it states that if you execute a teaching profession you are automatically a freelancer. In that case it doesn't matter if you only work for one school or more. Even if you have a contract with a school technically you are delivering a service as an independent person after agreeing to a price. The school has no responsibilities for employing you. It'd be different if a teacher doesn't just teach but actually opens up a language school which generates more turnover (50.000+), has its own logo, maybe even employs people, etc.. For the Umsatzsteuer I found this link very helpful: http://www.gulp.de/kb/lwo/steuverord/umsatzsteuer.html (once again, German law explained to Germans in an easier language so that we actually understand our own system - maybe we should start a whole wiki page on this as well).

About insurances, do you mean by expat insurance insurances that are offered by international insurance companies? I looked into those and they can be an option but I found that they're rather expensive and I find the idea disturbing that your insurance agent is most likely in a whole different country. Do you have any experience with them? Do they work like private health insurances in Germany? A lot of international insurances I came across also had catches such as only providing health care for so many years or certain conditions, that e.g. you do not work but only visit or travel.

Is there anybody out there who is maybe a self employed German or has been dealing successfully with the Finanzamt for a couple years? I'm not self employed but rather employed so all of this is completely new to me. Another reason for me trying to make this documentary is because I find it outrageous how language schools tell foreigners over here to "just walk into the Finanzamt, tell them you're a Mitarbeiter and that you need a taxnumber as a freelancer.". Sure it gives the schools tons of advantages to get around actually having to employ them, such as paying part of their health insurance and social security, but I think there should be at least a guide or something to keep people from making mistakes and getting into trouble without even realizing it. German people take seminars, read books or get assistance from the Ämter. Most information isn't even available in English, let alone friendly "Beamte" at the Finanzamt that will speak English to you. Especially the part about the "Rentenversicherung" aggravated me, because everyone told my wife that as a foreigner being a freelance teacher here they do not have to worry about this...let alone any information on how to declare their taxes. That's just like telling someone "Oh, we don't really pay for things here...just walk into a store, take what you need and if nobody tells you to, you are not required to pay for it, it's all good".

So my thinking is maybe we can collect all the information we have since I'm sure everyone had different problems and found different solutions and then really do set up a guide that'll make this whole topic crystal clear, let it be on here or on Wikipedia.
ProChiller82
I fixed the part about business tax and added some more about insurances. I made it a Wikipage with Small Town Boy's link. Edit and add whatever you feel necessary.
Starshollow
just tried to edit the insurance part - but it is blocked against editing.... any idea how to overcome this?

Cheerio
bailandou
Hello everybody!
I am looking for some experienced TTers, who can help me with some advices.
I am looking for a job as a French teacher. one of the language institutes wrote that they want to hire me as a freelancer.
I don't know so much about the German tax system cos I ve been here since only 1 week and I guess it is not easy to understand such a complicated system even if i woud have been here since some years.
Any way, in the moment I am enjoying my German wife insurance, I don't have also to pay taxes cos I am studying and I don't work.
My questions are listed down below:

I have been told that when I earn up to 400 € as a freelance teacher, I will not be asked to pay taxes. Is that correct?

If I will not earn more than 400 € Does this mean that I can keep my wife insurance and don't have to look for my own one?

I am going to be interviewed tomorrow morning by the language institute. Any advice what are the main issues I should discuss and be careful about?

Thank you guys in advance. your help will be very appreciated
I am looking forward to hearing from you

Topics merged by admin
swimmer
I have been told that when I earn up to 400 € as a freelance teacher, I will not be asked to pay taxes. Is that correct?
Well 400 Eur a month would be well under the annual tax threshold at which income overall is taxed - assuming no other income. But it's a meaningless figure in tax terms and presumably one that you have heard of because it has relevance in respect of "mini-jobs" (which are a completely different thing).

Will you pay tax on it? We don't know because we don't know your circumstances. You won't if it all you earned per year is 4800 Eur and you are on your own. You will if you have lots of other income (be it earned or unearned like bank interest) that takes you over the tax threshold.

You might also be expected to pay 19% pension contribution on it - a rate that may be applied to certain freelance professions including teaching.

But is it worth getting hooked on to the tax aspect? We#re not talking a big obligation - 4 hours a week, a couple of evening classes. To make life choices about working or not based on the propsect of not getting 15% of any amount above yout tax threshold (ie. the lowest marginal rate). Just a couple more hours work would get that back anyway.
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