Kleinunternehmer will start 2nd freelance job

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Hi all,

 

I finally registered and decided to post after a long time lurker without an account as, although I've so far stumped my way through german bureaucracy with help from fellow ex pats and TT forum, I now have a fairly unique predicament!

 

I'm currently a Kleinunternehmer as a musician / sound guy earning just enough money to eat. But I'm fed up of being so poor and will now start as a bike courier as well with TWISTER in approx 2 weeks, but will continue doing music/sound engineer work as a supplemental income.

 

The bike messenger thing is 100% self employed but I have to handle MvSt directly with customers and then calculate umsatzsteuer for my accounts at the end of each month.

 

I have no problem being able to do my own tax returns and accounts but my question is concerning A) the switch from Kleinunternehmer to an umsatzsteuer handling Freiberufler as I have now kept accounts as a KU without collecting MvSt for 7 months with a net revenue of 2.767,28 €. Although this isn't very much, should I have to pay the 19% on everything, that is 525€ which I simply don;t have right now, and would put me off of starting my second job.

 

And then secondly, how do I regester my self as a musician / bike courier? That's like saying I am a professional footballer slash proctologist... they are so unrelated to make it unlikely that I could claim a guitar and a new set of wheels as costs under the same "business"...? Or do I need to have two businesses?

 

Can anyone help me with this, or have similar experiences?

 

Thanks!

:) :) :)

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First let's be clear on some terminology:

 



  • freelance = freiberuflich = brain (needs a university degree) or artistic job, e.g. medical doctor, lawyer, engineer, artist, author
  • gewerblich: all other jobs, e.g. bike courier

 

So, your musician job is freelance, your sound engineer job may be freelance if you have a university degree in that area, but your bike courier job will be gewerblich.

 

Since the bike courier job will be gewerblich, you will have to apply for a Gewerbeschein at your local Rathaus. It will cost around 50€.

 

Now to the VAT aspect.

Why do you want to charge VAT = Mehrwertsteuer = MwSt. ?

As long as you still have Kleinunternehmer status, you don't have to, you know.

 

************************************************

 

Option 1: stay a Kleinunternehmer

 

You have Kleinunternehmer status as long as your total turnover (= what you take in, not your profit!) is below 50,000€ this year and was below 50,000€ last year.

 

Example:

2011: you took in 17,000€ from all activities (freiberuflich + gewerblich)

2012: you took in 49,000€ from all activities (freiberuflich + gewerblich)

--> you lost Kleinunternehmer status on 31.12.2012 and had to charge VAT on all income starting from 1.1.2013

 

2011: you took in 17,000€ from all activities (freiberuflich + gewerblich)

2012: you took in 17,000€ from all activities (freiberuflich + gewerblich)

--> you are still a Kleinunternehmer and do not have to charge VAT in 2013

 

Please read Freelancing as English Teacher for details of what you have to write into your invocie as along as you are a Kleinunternehmer.

 

So, as long as you will not exceed 50,000€ income this year, you do not have to charge VAT.

You can of course opt for VAT voluntarily, but there is no advantage to doing so for you, it's not as if you work in an area where you buy a lot of stuff, you simply sell a service.

 

************************************************

 

Option 2: opt for VAT

 

If you voluntarily opt for VAT you are bound to that decision for at least 5 years, this means that you will have to charge VAT on all your income (freelance and gewerblich) for the next 5 years at least, even if it is low, i.e. in the Kleinunternehmer region.

Opting for VAT also means that you will have to submit monthly Umsatzsteuer-Voranmeldungen (see TT Elster wiki) and forward that VAT unasked to the Finanzamt's bank account each month.

You only submit one Umsatzsteuer-Voranmeldung for all your activities, be they freelance or gewerblich.

 

But I wouldn't do so voluntarily, hang on to your Kleinunternehmer status for as long as you can.

As a Kleinunternehmer you only have to do your tax return, i.e. do your tax work once a year.

If you charge VAT you will have to keep your bookkeeping up-to-date since you have to know at the end of each month how much you took in and how much stuff you bought during the preceding month in order to be able to fill in the Umsatzsteuer-Voranmeldung, don't underestimate the effort.

 

If you do opt for VAT, you will owe VAT on all your income that you have made this year until now, i.e. your 2,767.28€ will be treated as including 19% VAT.

This means that they regard it as 2,767.28€/1,19 = 2,325.45€ net, on which you will immediately owe: 19% of 2.325.45€ = 441.83€ of VAT, for which you will have to submit Umsatzsteuer-Voranmeldungen for all months until now, and immediately have to transfer those 441.83€ into the Finanzamt's bank account.

 

The fact that you have to also pay VAT on all the income that you had up till now this year is because you voluntarily opt for VAT and is laid down in §19 UStG Absatz 2:

 

  • (2) Der Unternehmer kann dem Finanzamt bis zur Unanfechtbarkeit der Steuerfestsetzung (§ 18 Abs. 3 und 4) erklären, dass er auf die Anwendung des Absatzes 1 verzichtet.

************************************************

Whatever you choose (staying a Kleinunternehmer or opting for VAT), you will anyway have to submit two different profit/loss calculations in your tax return:


  • profit/loss calculation for freelance activity --> fill profit into Anlage S
  • profit/loss calculation for gewerbliche activity --> fill profit into Anlage G

 

The thing is, the gewerbliche profit is subject to an extra tax called Gewerbesteuer if it exceeds 24,500€, that's why you have to tell them exactly how much of your income is gewerblich.

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Wow, thank you so much for your extremely detailed and helpful answer, PandaMunich!

 

I have just emailed the bike courier company to ask them if I can continue being a kleinunternehmer... they are not an employer, they are a "Vermittler" which means I am taking money directly from customers and then just have to pay "Vermittlungsgebühren" but their company policy or supplied courier documents might prevent me from doing that, so I'll wait on their reply.

 

In the case that I must charge MvSt, would I have to pay 19% on my previous income even if my earnings were made by strictly providing a service and not a product?

 

One of my DJ friends just said he charges 5% Umsatzsteuer because it falls under being a service and drops tax completely for international gigs... is that right??! If so, my bill is down to around 50 bucks (due to both international and service categories) which I could stomach...

 

Thanks in advance, you'd already been extremely helpful!

 

:D

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In the case that I must charge MvSt, would I have to pay 19% on my previous income even if my earnings were made by strictly providing a service and not a product?

 

One of my DJ friends just said he charges 5% Umsatzsteuer because it falls under being a service and drops tax completely for international gigs... is that right??! If so, my bill is down to around 50 bucks (due to both international and service categories) which I could stomach...

 

Your friend is misinformed.

Unless your friend is a farmer who owns a forest and who sells tree logs and opted for paying a flat 5% VAT rate (pauschalierend), he should have been charging 19% for his services.

 

Please see here for an overview of the VAT rates:

 



  • 5%: tree farmers, pauschalierend
  • 9%: normal farmers, pauschalierend
  • 7%: food, takeaway food, books, newspapers&magazines, taxi drives under 50km, tap water
  • 19%: all other products and services

 

So it doesn't matter whether it's a service or a product, if you deliver in Germany you pay the same VAT rate of 19%, with the few exceptions listed above.

 

The distinction between a service or a product is only important if you deliver outside Germany, see here:

 

 

  • if it is a service that is delivered to an EU or non-EU customer (= private person), i.e. you have a business (you!) to customer (the private person) relationship (B2C) then you have to charge 19% German VAT as usual and forward said VAT to the Finanzamt.

  • if it is a service that is delivered to an EU business, i.e. you have a business (you!) to business (the EU business) relationship (B2B) then you do not charge VAT, but lay the duty to pay the VAT at that country's rate on that EU business, this is called reverse charging.
    To avoid that EU business conveniently "forgetting" to pay that VAT, there is a snitching mechanism in place through a form called "Zusammenfassende Meldung" in which you have to report every quarter all such EU cases of reverse charging, and the Germans will then inform those countries' tax departments who will then check whether they really received that VAT.

  • if you deliver a service to a non-EU business, then you do not charge VAT.

  • if you deliver a product to an EU customer then you pay your German VAT, as long as you don't deliver more than ....€ worth of products to that country. If you do deliver that much to the other EU country then you have to charge that other country's VAT rate (for example Amazon.co.uk charges German customers the German 19% VAT rate since they deliver wares for more than 100,000€ a year to Germany). In Germany this is laid down in the Versandhausparagraph §3c UStG, see here for an overview of the limits from which you have to start charging that other country's VAT rate (and said VAT will go to the other country's tax coffers!).

  • if you deliver a product to an EU business then you do not charge VAT, see innergemeinschaftliche Lieferung here.

  • if you deliver a product to a non-EU business or customer then you don't charge VAT, see here.

 

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Correction to post 2:

You have Kleinunternehmer status as long as your total turnover (= what you take in, not your profit!) is below 50,000€ this year and was below 50,000€ 17,500€ last year.

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OK thanks again for your great help!

 

You put me onto the cookie crumb trail of german tax law and I managed to find an online copy of the Umsatzsteuergesetz and with a bit of help from google and further interrogating of my DJ friend, it appears that his tax advisor has him charging 7% MwSt because of (I think) the following line in the act:

 

 

die Einräumung, Übertragung und Wahrnehmung von Rechten, die sich aus dem Urheberrechtsgesetz

ergeben,

This is chapter 12 (Steuersätze), section 2, subsection 7, point C.

 

So this basically means (to what I can gather) that people who directly charge for works of copyright protectable art, can use the reduced 7% rate.

 

This means, I can sell a musical remix to a record label with 7% MwSt but if I then press that onto a CD and sell the CD, I have to charge 19% because now I am selling a product/copy of that work of art and not the work itself. This means a DJ falls into a hairy grey area whereby if it was a live set, IE making music on the spot, this would be 7%, whereas by using pre-existing copyrighted works in his set he would be liable for 19%, or so I understood.

 

Although one income stream is indeed selling original music, which would then be 7%, one type of work I do/did falls under the same grey area as would a DJ... I take another peoples music and make it sound better by adding my own creative touches. This means I could technically maybe qualify for the 7% based on this tiny, secret sentence in Umsatzsteuergesetz....

 

Although this is now probably gotten too legal for continued discussion, and I think I might just have to consult a pro, I thought it would be interesting to share nonetheless!!!

 

:lol:

 

Thanks!

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Adding "your own creative touches" does not make a musical work unique enough that you can claim effective copyright and therefore charge 7% MwSt for your performance. If you wrote music and/or lyrics and played them live (in effect you are a musician, not a DJ) then the reduced VAT rate would apply.

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Do you mean this in relation to my DJ friend or in relation to myself?

 

I myself either outright 100% compose the music or am an integral part of the compositional process of the music I work with for other people (an example would be composing and playing both the drums and bass parts for a song to be recorded).

 

In regards to DJs (which I do not ever do myself) I agree that adding a few FX whilst mixing other people's records doesn't constitute making entirely new music and I would therefore also assume it falls under the 19% category, but further talking to my friend reveals that everyone he knows who he's ever asked, who works professionally as a DJ in germany, charges 7%.

 

So, keine Ahnung! :blink:

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If I were you I'd start casting around for an English-speaking accountant ("Steuerberater" = tax consultant) - PDQ.

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Yeah this seems to be the most popular advice when tax topics are brought up - all my friends have said the same - but in my position I will have to go without due to it being financially impossible.

 

The difference between me and (almost every single one of) my ex-pat friends is that I can speak german and am not afraid to fill out my own tax forms nor to speak to people at the Finanzamt and/or Burgeramt.

 

So once I've found out about whether I can continue being a Kleinunternehmer from the bike messenger company, I will either continue as I've been doing (with the exception of picking up a gewerbeschein) or register the change with the finanzamt and just ask for the required forms to be able to declare the previous earnings and try where possible to fit whatever invoices I can under the 7% reduced rate where applicable.

 

so will just have to wait and see for now.

 

Thanks for everyone's replies!

 

:)

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If I were you, I'd go Deroystrasse to information centre of Finanzamt and ask there, whether I really need a Gewerbeschein for bike couriering.

 

They might tell you exactly the same as you friends - go to tax consultant. And you just say them that you don't have money to pay tax consultant and they are called information center. This is what I actually did once adding in my broken German, that it is their laws and I just want to pay taxes in this country. In my case the topic was something different, but the guy somehow annoyed went away for a moment and got me a phone number of a person within FA who was later able to reply to my questions.

 

This is also might be useful:

http://de.wikipedia.org/wiki/Gewerbe

http://de.wikipedia.org/wiki/Freier_Beruf_(Deutschland)

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On 7/12/2013, 10:57:26, PandaMunich said:

 

Your friend is misinformed.

Unless your friend is a farmer who owns a forest and who sells tree logs and opted for paying a flat 5% VAT rate (pauschalierend), he should have been charging 19% for his services.

 

Please see here for an overview of the VAT rates:

 


  •  
  • 5%: tree farmers, pauschalierend
  • 9%: normal farmers, pauschalierend
  • 7%: food, takeaway food, books, newspapers&magazines, taxi drives under 50km, tap water
  • 19%: all other products and services

 

So it doesn't matter whether it's a service or a product, if you deliver in Germany you pay the same VAT rate of 19%, with the few exceptions listed above.

 

The distinction between a service or a product is only important if you deliver outside Germany, see here:

 

 

  • if it is a service that is delivered to an EU or non-EU customer (= private person), i.e. you have a business (you!) to customer (the private person) relationship (B2C) then you have to charge 19% German VAT as usual and forward said VAT to the Finanzamt.
     
  • if it is a service that is delivered to an EU business, i.e. you have a business (you!) to business (the EU business) relationship (B2B) then you do not charge VAT, but lay the duty to pay the VAT at that country's rate on that EU business, this is called reverse charging.
    To avoid that EU business conveniently "forgetting" to pay that VAT, there is a snitching mechanism in place through a form called "Zusammenfassende Meldung" in which you have to report every quarter all such EU cases of reverse charging, and the Germans will then inform those countries' tax departments who will then check whether they really received that VAT.
     
  • if you deliver a service to a non-EU business, then you do not charge VAT.
     
  • if you deliver a product to an EU customer then you pay your German VAT, as long as you don't deliver more than ...€ worth of products to that country. If you do deliver that much to the other EU country then you have to charge that other country's VAT rate (for example Amazon.co.uk charges German customers the German 19% VAT rate since they deliver wares for more than 100,000€ a year to Germany). In Germany this is laid down in the Versandhausparagraph §3c UStG, see here for an overview of the limits from which you have to start charging that other country's VAT rate (and said VAT will go to the other country's tax coffers!).
     
  • if you deliver a product to an EU business then you do not charge VAT, see innergemeinschaftliche Lieferung here.
     
  • if you deliver a product to a non-EU business or customer then you don't charge VAT, see here.

 

very well explained, thanks

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20 hours ago, alien7 said:

if it is a service that is delivered to an EU business, i.e. you have a business (you!) to business (the EU business) relationship (B2B) then you do not charge VAT, but lay the duty to pay the VAT at that country's rate on that EU business, this is called reverse charging.
To avoid that EU business conveniently "forgetting" to pay that VAT, there is a snitching mechanism in place through a form called "Zusammenfassende Meldung" in which you have to report every quarter all such EU cases of reverse charging, and the Germans will then inform those countries' tax departments who will then check whether they really received that VAT.

 

Question: If I deliver service from Germany to EU business which is not VAT registered should I charge or not?

 

I guess in this case reverse charge will not work as other company is not VAT registered, right?

 

p.s  as far as I figure out from reading all this topics, I have to fire my Steuerberater because she has optionally registered me as VAT payer and obtained VAT ID, as I could have been without it at least for first 1-2 years and avoided all the complications of handling VAT and voranmeldungen... :angry:

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