Freelancing in Germany
Freelancing in Germany
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, specifically 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 information available about this topic and a lot of people did something but don‘t really know why or what exactly. 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 anything like that.
First of all, non-EU citizens 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 warned. 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 prove that you have health insurance. More on that topic later.
After you got your visa you need a tax number for freelance employment. When you register for residence most likely you will get an orange tax card with your tax class (determining how much tax 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 for you. Every district or community has a Finanzamt that‘s in charge for everybody living there. If you don‘t have your own office (i.e. you work from home), 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. If you live in Hamburg in the district Wandsbek try searching for "Finanzamt Wandsbek" and it‘ll show you where it is, when it‘s open, etc.
When you know where it is you have two 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 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 pdf-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 filling it out at home and taking 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 three weeks „We‘re sorry to inform you that your request cannot be processed. We need the following information...“.
The Form "Fragebogen zur steuerlichen Erfassung"
This form is not available in English, so if you do not know someone that‘s fluent in German I will here provide 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.
1.1 Information about your spouse
Note: line 12 Religion enter VD if you're not paying church tax
1.3 Telephone number email addresses
1.4 The 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 business tax and file a business at the "Gewerbeamt". 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, file a new business or apply for a business tax number. Write down „Sprachlehrer - Lehren der englischen Sprache“ (Language teacher - teaching the English language).
1.5 Bank info („Alle Steuererstattungen“) - that means that all tax claims and returns will be automatically taken off / transferred to your account. This will keep you from having to pay fines for paying late or running after them to get your money. Enter your account 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 - they will hand it to you when you turn it in, or Google „Teilnahmeerklärung Lastschrifteinzugverfahren Finanzamt“.
Note line 40 SEPA
1.6 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 deductible for most people.
1.7 Fill this out if you want someone else (a partner or something) to receive mail that relates to your taxes from the Finanzamt.
1.8 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 three years - for most of you that should be a no, if yes then state your former Finanzamt and tax number.
2.1 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 a 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 tax you estimate you will have to pay. If you have your tax card find the field that says „Lohnsteuerklasse“ and under „Steuerabzugsbeträgte“ write your „Steuerklasse“, whichever one is written there. If you are unmarried 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 three words in one and mean IncomeSurplusCalculation). I would recommend checking that one. 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 125 check "nein", they are asking if you have a business year that differs from the calender year - 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 filling out this form at home and taking 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 English and get in touch with them. You do not want the person that calculates your taxes to get upset with you.
updated to reflect the new form.
See also German insurances
The next important issue for foreigners here is insurance. You are required by law to have health insurance. This cannot be the cheap travel insurance that you buy for a trip to the US or Spain but an insurance that is officially recognized by the German government.
If you are an employee than it is straight forward. Your company will enroll you and you will get a health card and the costs will be deducted from your salary much like income tax. You don’t need to worry about it unless you choose to go private, As an employee all that really matters is how much you get to take home each month.
Family members are also covered automatically.
If you are a freelancer than it’s different. If you earn (income less expenses) more than 395€ (in 2013 the limit was 385€). As soon as you cross that limit you are supposed to tell your Krankenkasse and start paying for your own policy.
The other option as stated before is private 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 two 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.
Private insurance does not have that doctor fee. The doctor will mail you a bill that you need to pay. After you paid €300 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 three month premium at the end of the first 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 and now you get another dentist bill worth €120. You could file it in or you could choose to pay it yourself. If your plan has a three-month premium reward then this would mean the insurance would pay you e.g. €600 for not having contacted them, meaning even if you pay the €120 you are still better off. I estimated a monthly premium of €200 for very basic coverage.
To find the right insurance plan for you I extremely important to find an independent insurance broker. There are many stories of expats being signed up for an expensive health insurance policy because it paid a great premium to the salesman. 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 arrange a contract 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.
Also if you are older, overweight (BMI index) or have health problems you are better off with the public system.
Lastly and most importantly if you go private it is EXTREMELY difficult to get back on the public system. The public system is based on your salary, earn less pay less. Private is a set cost, earn a lot and pay a little, happy, earn a little and you could conceivably find half or more of your income paying for health insurance.
Other insurances you should consider are a liability insurance (Haftpflichtversicherung), private as well as professional depending on what you do, and something we call "Hausratversicherung". The Hausratversicherung will cover everything you own and that you have in your apartment. Usually they're something between 40 and 70 euros per year depending on where you live, the size of your apartment, etc. They will be there in case of a fire or flood in your apartment or if somebody breaks into it and steals your jewelry. Some will even cover personal items stolen out of your car or your suitcase when you travel.
If you're running a business or something more serious than a language teacher, a "Rechtschutzversicherung" (legal insurance) might be something to look into as well. They will assist if you need a lawyer to argue for your rights. Make sure the insurance knows you're self-employed to offer you a plan that really covers you. Last but not least, there is "Unfallversicherung" - accident Insurance. Personally we have it, but it's the insurance that I'm most unsure about. I'm sure I'll be glad if something really happens. This one will cover expenses you have related to an accident, e.g. you are involved in a car wreck and from one day to the next you need to be in a wheelchair, require special attention and need to modify your apartment to your new needs.
The 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 get in touch with 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 three months to tell them. I wasn't aware that the five-year rule does not apply to teachers. Unfortunately the reduced membership I had mentioned here at first does not exist. If you quit your freelance work within 60 months after started paying you can claim it back when you leave the country.
An insurance broker will be able to advise you on suitable long-term pension plans and the like.
Okay, this is my quick introduction on how to become a freelancer in Germany based on personal experience. If you have any more 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, and not a lawyer, government representative, or whatever. I‘m providing information based on personal experience.
Written by ProChiller82
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