Freelancing in Germany is booming. In 2020 there have been almost 1,5 million registered freelancers in Germany. That is nearly three times as many compared to 1992. And freelancing in Germany is getting more and more popular amongst foreigners, as it is sometimes easier to find clients in Germany than full-time employment.
This guide will lay out your path to freelancing in Germany, whether you have already moved here or are still abroad.
Freelance vs. Self-employed in Germany
Before you continue your research on becoming a freelancer in Germany, you need to identify what kind of self-employed work you will be doing. This is because German law differentiates between freelancing and being self-employed as a tradesperson. The distinction is essential, as both categories follow different requirements for registration and taxation.
As a freelancer in Germany, you need to work in a skilled field and provide skilled services to other businesses or people. Common liberal professions (Freie Berufe) of freelancers in Germany are artists, teachers, doctors, engineers, scientists, software developers, designers, lawyers, tax advisors, and other skilled independent professionals as per §18 EStG. For more examples, take a look at this unofficial list.
Self-employed or Tradesperson (Selbstständiger or Gewerbetreibender)
Consequently, any other type of self-employment gets considered a trade business (Gewerbe), and you need to register it as such with the trade office (Gewerbeamt) in your city. This guide will solely focus on freelancing, and we will make sure to write a separate guide on how to start your own business in Germany as a trade business or entity soon.
Is freelancing allowed in Germany?
Yes, as long as you have a freelance work permit, you are registered in Germany, and fulfill the job skills listed above.
How to obtain a Freelance visa in Germany
Depending on your nationality, becoming a freelancer in Germany is easier or more complicated. First, let’s look at who needs a freelance visa and/or a freelance work permit. Often the freelance work permit gets called the freelance visa; however, both need to be distinguished.
A visa for freelance or self-employment only serves the purpose of allowing certain nationalities to enter Germany with the purpose of self-employment or freelancing.
A freelance work permit also called a residence permit for self-employment (Aufenthaltserlaubnis zur freiberuflichen oder selbstständigen Tätigkeit), allows foreigners to remain and live in Germany long-term and make a living as a freelancer or self-employed.
1. Who Needs No Freelance Visa Nor A Residence Permit?
If you are an EU, EEA, or Swiss citizen, you do not need any specific visa or residence permit. You can simply move to Germany and register with the tax authorities.
2. Who Only Needs A Residence Permit?
If you are a citizen from the US, Canada, Australia, New Zealand, Japan, Israel, or the Republic of Korea, you do not need a visa to enter Germany. You can simply travel to Germany as a tourist and then apply for a residence permit for self-employment within the first three months of your stay in Germany.
3. Who Needs A Freelance Visa & Residence Permit?
If you are a citizen of any other country, you will need to apply for a visa for self-employment first, and within the first three months in Germany, you will need to change your visa for a residence permit. The German government provides a nice graphic of the process.
All visa applications need to be done at a German embassy or consulate, and all residence permits in Germany get handled by the immigration office (Ausländerbehörde).
Requirements for a Freelance Visa in Germany
To become a freelancer in Germany, you need to provide proof of the following requirements for both the freelance visa and the residence permit for self-employment:
- Proof of financial stability to support your livelihood in Germany. This can be bank statements, but also future contracts of possible German clients.
- Prospective German clients and an economic need for your services. The German government will only grant a freelance visa or permit to those who can prove that there is a demand for their services in Germany. You will have a hard time getting permission to become a freelancer in Germany when only serving foreign clients. You should provide a letter of intent from German clients ready to hire you once you have the permit or invoices from past German clients you have already worked with from abroad.
- A professional license for certain regulated freelance professions, such as doctors, lawyers, etc. The German government provides the first steps to check whether your qualifications get recognized in Germany.
- Sufficient pension provisions if you are 45 years or older.
- You will need to have German health insurance already before applying for your visa. This is a delicate topic, especially for foreign freelancers in Germany and we have written an in-depth guide on private vs. public health insurance. Your best option to navigate the German health insurance jungle is to consult Feather. They provide insurance services for foreigners and have great experience with freelancers.
How to Register as a Freelancer in Germany
Once you are in Germany, you have registered your address and have a residence permit for freelancing, you need to register with the tax authorities (Finanzamt). You do so by filling out a rather complicated seven-page form called Fragebogen zur steuerlichen Erfassung. It is a questionnaire for your tax registration, which is even difficult for Germans to fill out properly.
Luckily you can use the free services of a company called Sorted. They focus on making taxation for freelancers in Germany easy and guide you through the process of filling the questionnaire all in English. They even submit it to the tax authorities. Once submitted, you will receive your freelance tax number from the Finanzamt.
Related Guide: Tax Number And Tax ID In Germany [What’s The Difference?]
Contrary to the self-employed Gewerbe, you do not need to register your freelancing business with the trade authorities.
VAT Tax – yes or no?
During your registration as a freelancer, you will have the option to request a VAT number on the tax questionnaire. Whether or not you need to charge VAT tax (Umsatzsteuer) depends on the type of freelance services you offer and the estimated revenue of the first two years.
Liberal professions such as doctors, dentists, and nonmedical practitioners do not have to charge and pay VAT. However, most other freelancers will have to deal with VAT tax.
Especially if you are just starting as a freelancer, it is difficult to predict how much revenue you will generate in the first year. If you earn less than 22.000 euros in the first year and not more than 50.000 euros in the second year, you can opt not to charge and pay VAT tax. In this case, you will qualify as a small business owner (Kleinunternehmer).
You can, however, opt to charge and pay VAT tax from the start. If you do so, you need to stick to your decision for at least five years. We advise you to speak to a tax consultant about your individual freelance services to make the best decision for yourself. Sorted also offers on-demand access to qualified tax advisors who speak English.
How Much Tax Do Freelancers Pay in Germany?
When freelancing in Germany, your revenue (reduced by business expenses) gets taxed with the general income tax, which is a progressive tax that ranges between 14 to 42%. Depending on your predictions and profession, the finance authorities will inform you whether you will need to pre-pay your taxes monthly, quarterly, or yearly. To balance your tax pre-payments and actual income at the end of the year, you need to submit a tax declaration within the first six months of the following year.
While there is very easy-to-use tax software available in English, the benefits of hiring a tax consultant may outweigh their costs, as they may identify areas to reduce your taxes and save you a lot of money. Sorted also helps you with your freelance tax declaration.
To better understand how much income tax you need to plan on paying, you can use this income tax calculator for Germany. You can translate the page to English by using Chrome as a browser. With a right-click, select ‘translate to English’.
Accounting for Freelancers in Germany
Let’s take a closer look at accounting and banking matters as a freelancer in Germany.
Bookkeeping and Invoices in Germany
When freelancing in Germany, it is super important to keep your books clean and orderly. You need to keep all of your incoming and outgoing invoices, receipts, bank account overviews, etc., for ten years in Germany, as you could always be audited during this time.
Luckily there is accounting software available in English that simplifies invoicing and bookkeeping in Germany. Such are Sorted, FastBill, sevDesk, and Debitoor. Lexoffice is also very popular in Germany but only available with a German interface.
Your invoices must contain the following information to be valid:
- The full (business) name and address of your customer
- Your full name and address (your brand name is not enough)
- The date of the invoice
- The number of the invoice (you assign the number and you can never have an invoice with the same number)
- Your freelance tax number
- Your VAT number and your customers VAT number (if applicable)
- A description of the service rendered
- The net amount
- The VAT amount if you are not a Kleinunternehmer
- The total price and payment due date
Banking for Freelancers in Germany
In terms of banking, we highly suggest that you get a separate freelance bank account from your private bank account. There are two main reasons for it.
Firstly, this is the only way to have a clear overview of your business expenses and income without having private expenses mixed, which is the number one step for easy bookkeeping.
Secondly, most banks that offer bank accounts for personal use exclude the use for business in their terms and conditions, which means your bank account could be closed and suspended from one day to the next since you are violating the terms. Clearly, you don’t want this to happen, so separate work and pleasure strictly when it comes to banking.
Multiple banks and financial service providers offer bank accounts, especially for freelancers and self-employed, such as Kontist and Qonto. Such bank accounts also allow you to connect to accounting software to pretty much automate accounting. Kontist even started also to offer full tax services.
We have written an in-depth guide, highlighting and comparing the best bank accounts for freelancers in Germany.
Related Guide: 5 Best Banks For Freelancers In Germany
Insurances for Freelancers in Germany
When living in Germany, a few insurances are must-haves. When freelancing in Germany, you might want to consider adding a few professional insurances to those that only cover your private life.
Related Guide: Insurance In Germany: Must-Haves For Expats
Health Insurance for Freelancers in Germany
Any person living in Germany must have health insurance. However, unlike employees, who only have to cover 50% of the health insurance premium, as the employer covers the other 50%, you will have to cover the health insurance costs 100% yourself as a freelancer.
Whether you move to Germany as a freelancer or transition into freelancing after you have been employed in Germany before, you will have different options on whether you can get public or private health insurance. To get more details on this complex topic, read our guide on private vs. public health insurance.
Our advice is to consult an insurance service provider like Feather, who will help you get the best health insurance for your situation.
Suppose you are an artist or publicist, including web designer, blogger, photographer, or other creative professions. In that case, you may lower the amount you have to pay for health insurance to 50% by becoming a member of the artist social insurance (Künstlersozialkasse – KSK). The KSK acts like an employer and pays the other 50% for you. You can find more information on the KSK and how to apply on our friend’s page, Settle in Berlin.
Professional Liability Insurance for Freelancers
While private liability insurance covers damages you cause to third parties, it does not cover damages resulting from the professional service you give to someone. This risk can only be covered by professional liability insurance (Berufshaftpflichtversicherung), also referred to as professional indemnity insurance.
Depending on your freelance profession or service you offer, you are legally obliged to have professional liability insurance. This applies, for example, to doctors, pharmacists, and lawyers.
Usually, professional liability insurance consists of different modules, covering your service, your company, your companies’ goods, and even data risks and cybercrimes. You can choose which module(s) is relevant for you. Hiscox is one of the most progressive insurance providers when it comes to freelance professions. You can calculate your cost and request a free quote via their homepage.
Social Contributions for Freelancers in Germany
As a freelancer in Germany, you usually don’t have to contribute to the social security system, which allows you to decide how you invest and/or put aside money for your retirement, possible unemployment, or long-term sickness. However, since you won’t have a monthly deduction of your salary for these contributions, be sure to create your own system, as many freelancers ‘forget’ or start too late to think about financial security in the future.
If your profession lies in one of the following areas, you are actually obliged to contribute to the German governmental pension fund:
- Teaching & Education
- Care-taking & midwives
- Artists & Publicists
- Sea pilots & coastal skippers
If you belong to these industries, you must register as a freelancer with the German Pension Insurance Fund (Deutsche Rentenversicherung). The regular contribution rate is 18,6% of your income; however, depending on your profession and income, you can also choose to pay more or less than that. For further information, you can contact the German Pension Fund directly.
Ficticious Self-Employment in Germany (Scheinselbstständigkeit)
When freelancing in Germany, you must have more than one client; otherwise, you might run into the risk of fictitious self-employment in Germany (Scheinselbstständigkeit). This could lead to repaying all social contributions and wage taxes that haven’t been paid while working for that one client and legal consequences regarding tax evasion. This law is in place to avoid cheating the system by pretending you are self-employed, but you work and act as a regular employee.
To avoid the threat of fictitious self-employment, you need to ensure that one client does not make up more than around 83% of your contracts and not more than ⅚ of your revenue.
Is Freelancing Possible While Being Employed in Germany
Yes, it is, as long as your work permit allows you to. However, freelancing as a side-hustle (nebenberufliche Selbstständigkeit) needs to remain a side-hustle. That means that you should not work more than 18 hours a week as a freelancer, and your freelance income should not be more than the income from your full-time job.
Be sure to check your work contract, as most often or not, you need to get written permission from your employer to be allowed to freelance on the side.
My wife, Jen, who is from Guatemala, decided to freelance as a web developer as a side-hustle some years ago. Before she could do so, we requested the extension of her work permit to include the permission for ‘selbstständige Nebentätigkeit’. We did this by sending a formless letter to her caseworker at the Ausländerbehörde, explaining the benefit she can bring to the German economy and that she had permission from her employer. It took about two months to get her work permit extended.
Whether you freelance on the side or full-time, the steps of this guide for registration, bookkeeping, etc., remain the same.
There you have it, a detailed overview to start your freelance career in Germany. Depending on your profession and skill set, you should tackle quite a few more individual topics and questions. You can browse the official websites of the German government and even call them up for advice.
Disclaimer: Neither myself as the author of this article, nor Simple Germany as a business, are qualified to provide tax and business advice under German law. We cannot provide specialist tax and insurance services beyond any of the general tips contained herein. For tax advice, we strongly recommend you consult a professional tax consultant.