Self-employment in Germany

Have you found a freelance job already and want to make sure that everything is in accordance with the regulations in Germany? Then you need to pay attention to the following things:

Registering as a Freelancer (Freiberufler) or Sole Proprietor (Gewerbetreibender)
The first step is determining whether your work falls under freelance professions (Freie Berufe) or trade-based self-employment (Gewerbe).

• Freelancers (e.g., writers, consultants, graphic designers, doctors, and artists) only need to register with the tax office (Finanzamt).
• Sole proprietors engaged in commercial activities (e.g., e-commerce, retail, or tradespeople) must also register with the trade office (Gewerbeamt) and may need to pay trade tax (Gewerbesteuer).

Getting a Tax Number (Steuernummer)
As a freelancer, you must register with the Finanzamt by submitting the tax registration form (Fragebogen zur steuerlichen Erfassung) online via ELSTER. This will get you a tax number, which is essential for invoicing clients.
Pay attention to the confirmation letter from Finanzamt which might contain details like do you have to register a company (Gewerbe).

Understanding VAT (Umsatzsteuer/MwSt.)
Depending on your earnings, you might need to charge and pay VAT (Mehrwertsteuer, commonly 19% or 7%). However, if your turnover is below €22,000 in the first year and €50,000 in subsequent years, you can opt for the small business regulation (Kleinunternehmerregelung) and avoid charging VAT.

Health Insurance
In Germany, health insurance is mandatory. As a freelancer, you can choose between:

• Public health insurance (gesetzliche Krankenversicherung), where contributions depend on your income.
• Private health insurance (private Krankenversicherung), which might be cheaper for higher earners but comes with long-term cost considerations.
  You can find more info about the healt insurace here

Pension Contributions (Rentenversicherungspflicht for Some Professions)
Some freelancers, like teachers, artists, and caregivers, must contribute to the statutory pension scheme (Deutsche Rentenversicherung). Others can contribute voluntarily but should consider private pension plans.

Bookkeeping & Tax Returns
Keep track of your income and expenses. Depending on your revenue, you may need to submit:

• Quarterly VAT returns (Umsatzsteuervoranmeldung) if you charge VAT.
• Annual income tax declaration (Einkommensteuererklärung) and, if applicable, a profit & loss statement (Einnahmen-Überschuss-Rechnung - EÜR).

Invoicing Correctly
Your invoices must include specific details like your name, address, tax number, client’s information, invoice number, date, description of services, net amount, VAT (if applicable), and total amount.

Professional Liability Insurance (Berufshaftpflichtversicherung)
While not always required, freelancers offering consulting or creative services should consider professional liability insurance to protect against legal claims.

Make sure you check the legal insurance part as well here

By following these steps, you ensure that your self-employment in Germany is compliant with regulations and runs smoothly.