You don’t have a German passport? Then this FAQ about IT Freelance for you
Picture: www.fr.123rf.com/ image ID : 32268627
Hi there, feel free to ask your questions in the comments below (no registration required). If you wanna follow this article click here for newsletters.
– If the tax office classifies you as a freelancer (Freiberufler), your formalities cost 0 Euro. If you are classified as an entrepreneur (Unternehmer) / tradesman (Gewerbe), the registration fee totals 15 euros (online registration) up to a maximum of 31 euros (registration happens directly at a trade office or public order office).
– You only have to inform your employer about your intended self-employment if this is explicitly stated in your employment contract. So, read your employment contract. If it doesn’t say anything about it, it’s up to you to decide whether or not to inform your employer.
Informing your insurance company of your intention to become self-employed is not a mandatory, but it is just a common sence. As soon as you work a lot self-employed, the monthly amounts will change significantly (guess whether they will be higher or lower 🙂 ). Sooner or later your insurance company will notice that you are working self-employed. It is quite possible that you will have to back pay a lot. Even if you haven’t had a doctor’s appointment in months. Isn’t it reasonable to find out in advance how much your monthly payments can be changed?
You must inform the Immigration Office in advance of your intended self-employment because as a full-time freelancer another visa category is required: Residence permit for the purpose of freelance or self-employment (Aufenthaltserlaubnis zur selbstständigen oder freiberuflichen Tätigkeit). If you have an unlimited residence permit, e.g. a so-called settlement permit, you do not have to inform the Immigration Office.
– To register your earnings, all your invoices must be stored in a secure location with the following invoice numbers. The same goes for receipts as proof of your expenses. Keep both for 10 years.
– You need a business plan and a financial plan in two cases: a) to get a visa / residence permit; b) to get financing for your company.
Note that when applying for a visa / Residence permit for the purpose of freelance or self-employment, a trader needs to submit significantly more documents. Thus a freelancer does NOT need to submit the following documents: the company profile, the business plan, the business concept, the capital requirement plan. Source: service.berlin.de/dienstleistung/305249/en/
– A business bank account (Geschäftskonto*) costs more money than a regular current account (Girokonto*). Therefore banks are interested in opening a business account. Besides, a bank wants to win and keep you as a regular customer. That’s why most banks close their eyes when you start with your current account. In the second year you may want to switch to the business account yourself. After all, it is not too expensive (10-20 Euro per month) and there are good reasons for it, e.g. you could have received credit card payments.
– The only difference lies in taxation. There are two large categories here: а) Freelancer as Freiberufler and b) Trader as Unternehmer. The term Einzelunternehmer refers to category “b” and means “sole proprietor”. You can practice your freelance in both categories, as a Freiberufler and as a Unternehmer. See also the article: IT Freelance in Germany: FREELANCER vs TRADER
– After you have submitted the questionnaire for tax registration to the tax office (Finanzamt), officials there decide in which category to place you: Freelancer or sole proprietor. If you do not agree with this decision, you can appeal and try to change the decision.
– In my personal opinion Freiberufleris better, at least in the IT industry. Because:
– For you as a freelancer in the IT industry, the difference is not important. For freelancers / sole proprietors these terms are synonyms.
– The main difference: less tax, simplified accounting. By the way, both (freelancer as Freiberufler and freelancer als Einzelunternehmer can also be taxed as a Kleinunternehmer. See also the article:Who is a Small Business Owner (Kleinunternehmer)?
Kleinunternehmerregelung – is a simplified form of taxation for low turnover entrepreneurs. Based on § 19 UStG). See also the article: Who is a Small Business Owner (Kleinunternehmer)?
As an example the following situation: You as a freelancer have only one client. Your self-employment is similar to the normal employment: work in the office (no remote work), in regular days and times. In this case, pseudo self-employment can be assumed. What to do about it? Have more than one employer or work for an intermediary who can place several clients with you.
– A foreign self-employed person pays absolutely the same tax as a German self-employed person: #1 VAT (Umsatzsteuer / Mehrwertsteuer); #2 income tax (Einkommensteuer); #3 trade tax (Gewerbesteuer). S. auch den Artikel: IT Freelance in Germany: 3 types of tax that everyone should know
– There is no law for freelancer that prescribes hiring a tax consultant or accountant. You may do all the accounting and taxation on your own. However, you save a lot of stress and time as soon as you get professional help. A great thing about it – you can “connect” the tax consultant and the tax office – if the officials in the tax office have questions, you will write directly to your tax consultant and clarify everything with him.
If you are subject to regular taxation (Regelbesteuerung) and earn more than €1000 in an average month, it is quite possible that the tax office wants to get some tax in advance in the second or third business year. You’d have to pay that amount sooner or later anyway. That can be quite a bad surprise. However If you deposit 35-40% of your sales into a separate account or sub-account, you are 100% secure. Thanks to this sub-account you always have enough money in hand for the tax office and to pay your tax consultant. As a small business owner, you don’t necessarily need such a sub-account, because a small business owner pays very little tax.
To be continued. If you wanna follow this article and get informed about new Questions-Answers click here for newsletters.
If you have a question, feel free to write it in the comments below (no registration needed).
* – By the way, the GLOSSARY contains translations and explanations of German terms and abbreviations.
** – Strictly spoken, “the visa” is a permit just to enter the country and stay no longer then 3 months. German Embassy in Moscow on its website explains that the visit longer than 3 months is not a “visa” but a residence permit. A residence permit (Aufenthaltserlaubnis or Aufenthaltstitel) is available as a limited and unlimited.