Freelance contract or company employee - Germany

I've on the table two different offers in the space engineering business. Both opportunities are in Bremen.

Job positions are simular, both on European Space projects.

One is with a public service group offering me a TVDO contract E15/stufe 5: gross yearly salary of 55000 euro (+5% bonus)

The second one is offering me the possibility to work on its behalf as a free-lance (consultant) with an yearly gross salary of 70000 euro (bonus included).

On both jobs I'll travel a lot to my home country, Italy, where my family lives and I'll keep my primary residence. In Germany I'll be included in Tax Class IV.

What is the best opportunity from the economical point of view, considering taxes and others issues?

The public one is providing me a monthly net salary of 2500 euro (over 12,6 months).

What about the 70000 euro as freelance? I think taxes are really different.

Thanks

Perhaps ask your employer what is "freelance" about the second choice? What's your hourly / daily rate (freelancers don't have "jobs" or "salary" or "an employer" and the rest of course). You can work when you want or choose not to if it suits you? You have other clients (and the German tax rule is that not more than 82% of a freelancer's income comes from one client). That's "freelancing". Doing exactly the same job for a "salary" no different from an employed colleague (sitting at the same desk, same hours, no choice over working) is not.

It's a serious point because the German authorites have rules about companies' operating "freelance" arrangements when the person is no different from an employee (although these are not always enforced and it's really the company's problem if the tax authority gets interested). So, you may want to ask your prospective client (not "employer" going down that option) about that - what the tax authority thinks of their arrangements, have they ever had any problems with it.

You won't have a tax class as a freelancer of course. And residency for tax purposes is determined by where you actually spend your time - not by where you think it is, or where family might happen to be. However, if you are freelance and spend the 183 days (residency rule) or whatever it is in Italy, then I'd expect your income and tax to be nothing to do with Germany. Plenty of self-employed people work in a country different to the one they are resident an d pay tax in.

I will be probably not really a freelance since I'll work for a Customer only (Final customer will be the one assigned from the consulting enterprise in that case ALTRAN Germany).
They told me that in that case, as normally doing all the foreigners "consultants", I've to take my German "VAT" (may be its works also with the Italian "PARTITA IVA") and time to time I'll issue my work hours "receipts to ALTRAN.
Contract will be on project but for sure requiring more than 183 days in Germany, so full subjected to German taxation.

Are 70000 euro at the end real better of 55000 with a normal employee contracts?

Does the 70000 include VAT? 'cos although you can claim any VAT back you spend the difference will have to be paid to the government.
Check that first.

To work out whether it's better you need to try and work out what you can claim in expences eg, ie work out your actual "profit"
car & travel expences
home office (if needed)
equipment / clothing you need for work
Accountancy fees (you will probably need one)

Then deduct anything you would need to pay for health insurence / pension.

You then have your gross profit so you can see how much you will have to pay tax on - therefore your actual income.

Add then to the equasion - as a freelancer (unless contract says differently) they would be able to "we don't need to tomorrow don't bother coming in"

If that happens too often!

I think if I were you I would get an accountant to go through it with you.

I'm having a similar question. I've been in Berlin for one year and am working as an interaction designer with a firm fulltime. However, as a general rule, I'm finding that they are taking about 48% of my wages ... for a social system infrastructure that I will never really benefit from. I am a US citizen, here from San Francisco. I do own my own company in the states and am wondering if I should transition to becoming a freelance employee with my design agency here.

Does anyone have a general rule of thumb for how freelancing works here? What is the difference in tax from fulltime employment? I've just started exploring this topic...

Thanks!

I am not a member here, but my wife is. Therefore I am using her account.

This choice is difficult. I am in a similar situation to decide between employment and self-employment. The numbers are one thing and the security the other.

Basically here in Germany the costs for the employer to hire someone are about 30% above the "Brutto"-wage. The one self-employed is entitled to this extra money. Additionally there should be a premium on top of that to account for risks: sickness, looking for a new job, ...

When you are self-employed you have to pay your own health insurance (approx 15%, there is a maximum) and you do not pay into the German retirement fund (approx 20% of your "Brutto" wage: 10% paid by employer and 10% paid by the employee until the maximum is reached).

To compare the 70000 Euros to the 55000 Euros you need to compare the hours too.

That would mean that if the hours are equal a 55k€ wage results in approx 71k€ for the employer. As an self employed person this job should pay more than 75€k.

What other information and ideas do you have?

Ive done both - freelance contracts as well as been a company employee. I dont agree that you are "entitled" to the 30percent or whatever employee Nebenkosten as a freelancer. Its neither here nor there.

But as a freelancer I (and you) should be looking at much more than an extra 30 percent premium on top of the "equivalent" salary rate for your rate as a freelancer. In fact, probably 100-200 percent more. Thats the rule of thumb I worked under. But it also depends upon the sector and the market conditions at the time, as well as what you are willing to accept.