Freelancing in Germany is an attractive prospect for many freelancers thanks to its clean environment, cultural attractions, strong welfare system and general safety. Germany also has one of the strongest economies in the world and is very welcoming to foreigners who want to move there.
- Working as a freelancer in Germany
- How to become a freelancer in Germany
- German freelance tax
Working as a freelancer in Germany
Germany is one of the most popular and livable places in Europe – and for good reason. The incredibly diverse landscapes, clean and developed infrastructure, efficient transit systems and strong welfare system make it the perfect place to migrate to.
Many freelancers also choose to move to Germany because of its quality healthcare and the many benefits that it offers.
How to become a freelancer in Germany
Freelancing in Germany can be a lengthy process but it is well worth it. The following are what you’ll need to take into account before doing so:
#1 Types of self-employment
There are essentially three different self-employment types in Germany – Freelancer, Freiberufler or Gewerbe. Although all three of them are similar in nature, each one of them differs when it comes to legal obligations and taxes.
Before freelancing in Germany, you’ll need to decide what type suits you best since what you choose will determine what kind of taxes you pay.
If you work as a tradesperson and run a commercial business that sells products, your work is classified under the trade self-employment ‘Gewerbe’. To begin, you must first register with the German trade register or ‘Handelsregister’ and then contact the trade office to apply for a trade license.
You will then need to pay trade tax ‘Gewerbesteuer‘. The trade tax varies depending on the city you’re in and is calculated by multiplying 3.5% of your profits with the local tax factor ‘Hebesatz’.
Freelancer and Freiberufler are often thought of as the same thing in Germany but in reality, they’re actually two different things. A freelancer or ‘Freier Mitarbeiter’ is a person who’s hired by businesses for short-term projects or tasks.
As a freelancer, you will need to register with the tax registration office ‘Finanzamt’, after which you will receive your tax ID.
The term ‘Freiberufler’ is used to associate freelancers with particular occupations such as medical professions, coaches, graphic designers, IT professions and so on. Freiberufler in Germany often have their own practice and, like Freelancer, are not required to register with the trade office.
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Before you move to Germany, you’ll need to figure out what kind of Visa you need to apply for – unless you’re a citizen of an EU or EEA country.
You’ll need to specifically apply for the Freelance ‘Freiberufler’ Visa. This Visa is typically valid for 3 months and can be converted into a residence permit ‘Aufenthaltserlaubnis zur freiberuflichen oder selbständigen Tätigkeit’ once you’re in the country. These residence permits are valid for up to 3 years.
#3 Health insurance
It is advisable for you to obtain health insurance before you move to Germany or even before you apply for your Visa. This is because your Visa application requires you to have a certain amount of health coverage.
Germany has two options for health insurance – public and private. Public insurance amounts to 14.6% of your income whereas private insurance is only available for people who fit a certain criteria, freelancing being one of them.
You can always opt for public health insurance and supplement that with a private health insurance plan. Try and look for one that covers accidents as well or consider getting private liability insurance ‘Haftpflichtversicherung’.
#4 Address registration
As soon as you find your permanent accommodation, you must register it at your local Resident’s Registration Office ‘Bürgeramt’. This process is called ‘Anmeldung’ and ends with you receiving a registration certificate ‘Anmeldebestätigung’ – a document needed for example when opening a bank account. You will also receive your tax ID during your first Anmeldung.
#5 Bank account
A few banks in Germany, like DKB Bank, N26 and Revolut, allow you to open your bank account from abroad.
However it is easier for you to open your bank account once you’re in Germany. To do so, you’ll need:
- Your passport along with your Visa
- Anmeldung – proof of address
- Evidence of your income
German freelance tax
As mentioned above, if you’re working as a Gewerbe, you’ll need to pay trade tax but are exempt from it if you’re working as a freelancer or Freiberufler. You are however, subject to income tax and VAT.
#1 Income tax
The income tax rate in Germany is between 14% – 42% and is applied to everything you earn as a freelancer. To pay your income tax, you’ll need to create either an income surplus invoice or a profit and loss statement and will need to pay this tax on a quarterly basis to your local tax office or ‘Finanzamt’.
All self-employed individuals in Germany are subjected to pay VAT or ’Umsatzsteuer’ . VAT declarations need to be prepared periodically and declared.
The rate for VAT could be either 7% or 19%, depending on the goods and services offered by the individual. At the end of the year, you are allowed to file claims on said goods and services.
💡 You can easily pay your VAT tax through the official portal of ELSTER.
#3 Trade tax
As stated above, trade tax or ‘Gewerbesteuer‘ varies depending on what city you’re in and is calculated by multiplying 3.5% of your profit with the local tax factor ‘Hebesatz’. Limited companies, partnerships, Sole proprietorships and corporations are all subjected to this tax.
Trade tax only applies to self-employed traders and is also paid to the ‘Finanzamt’ as part of the tax declaration. However, If your annual revenue is less than 24,500€, you are exempt from trade tax.
Freelancing in Germany certainly sounds exciting. Would this be something you’d ever consider? Tell us your thoughts down below!