How am I a freelancer

How to become self-employed as a freelancer in 2021

What is a freelancer?

Freelancers, like traders, are self-employed who carry out a professional activity independently and not as an employee. However, they are not subject to the trade regulations but are considered a kind of special case.

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Basically, it is assumed that freelancers pursue a scientific, artistic, teaching, educational or writing activity, which makes them all service providers. This is fundamentally different from the tradespeople.

Ultimately, each tax office decides on a case-by-case basis who is classified as a freelancer and who still has to register a trade. As a rule, it refers to §18 EStG and §1 PartGG.

In the latter it says: "The liberal professions generally have, on the basis of special professional qualifications or creative talent, the content of the personal, responsible and professionally independent provision of services of a higher kind in the interests of the client and the general public."

Important: Many of the liberal professions - for example doctor, lawyer, notary and alternative practitioner - require special training and / or degrees. Others, however - such as translators, journalists and photo reporters - are not considered protected in Germany and can therefore be practiced by anyone - even without a corresponding qualification.

Registration as a freelancer at the tax office

Fortunately, it is quite easy to register as a freelancer with the tax office. Here's how to do it.

Step 1: Check whether you are entitled to the status "Freelancer"

Before you move on to the next steps, you should first clarify whether you are really a freelancer or not.

In times of digitization, there are many borderline cases and disputes that cannot be clearly classified into one of the categories of freelance or commercial.

Only when it is clear that the status is actually awarded to you is it worth taking further steps.

Step 2: Send an informal letter to your tax office

The next step is to write an informal letter to the tax office. This should include the following information:

  • your name and contact details
  • the job you want to do as a freelancer
  • the request for a tax number

Step 3: Prove your professional aptitude

As can be read in Paragraph 1, Paragraph 2 of the PartGG, a freelance activity is based on a “special professional qualification or creative talent”, which of course also has to be proven.

In plain language, this means that you have to submit documents to the tax office that prove your professional suitability. These can be, for example, certificates, diplomas and diplomas, but also, for example, job references.

You can either submit the relevant evidence on request or send it directly to the tax office in your informal letter. We recommend the second option, as it will save you some time.

Step 4: Fill out the tax registration questionnaire

Even if this questionnaire from the tax office seems pretty daunting at first, it is a reason to be pleased. Because if you have received it, that means: The tax office has recognized your freelance status and is ready to issue you a tax number.

But before that can be done, you must of course first fill out the questionnaire for tax registration truthfully and completely and send it back to the tax office.

Tip: You can find a lot of help for filling out the questionnaire on tax registration on the Internet. However, if you really want to be on the safe side, we advise you to fill out the document together with your tax advisor.

Step 5: Wait for your tax number and get started

Now nothing speaks against taking up your activity.

Even if you have not yet received a tax number, you can already pursue your job and even write invoices. Please note, however, that you note on this for your customers that a tax number has been applied for and will be submitted later.

Good to know: As a freelancer, you do not have to register a business. Going to the notary, registering in the commercial register and becoming a member of the IHK or HWK are aspects that you can remove from the agenda with a clear conscience in the course of your freelance work.

Business account for freelancers

If you want to start your own business as a freelancer, you should of course think about your finances as early as possible. Our recommendation for you: Separate your private budget from your business budget right from the start and use a separate business account for this.

You can find out which business account is particularly suitable with the help of this overview:

Taxes for freelancers

As a freelancer, you have to pay taxes like other self-employed people.

Basically, these are these taxes:

  • Income tax
  • value added tax
  • Solidarity surcharge

Important to know: freelancers are not automatically exempt from sales tax. If you want to have a corresponding exemption, you have to make use of the small business regulation.

Other taxes that you may have to pay as a freelancer are these

  • Income tax (if you have employees)
  • Church tax (if you are a member of the Protestant or Catholic Church)

A tax that freelancers generally do not have to pay is trade tax.

Accounting for freelancers

Freelancers enjoy certain privileges not only with regard to the taxes they have to pay. Even when it comes to accounting, it quickly becomes clear: the status of freelance work is actually worthwhile.

As a freelancer, you are basically not required to keep accounts. As a rule, it is sufficient for the tax office if you attach an income surplus calculation (EÜR) to your income tax return.

This fact only changes when you set up a corporation or make very high profits.

Advantages and disadvantages for freelancers

At this point it should already be clear: Becoming a freelancer has some pretty interesting advantages. But you should definitely know what disadvantages this status is associated with.

Benefits of freelance work

  • no business tax
  • Determination of profits using the EÜR
  • no accounting requirement
  • simple registration process

Disadvantages of freelance work

  • Restrictions on the activity carried out
  • Proof of suitability must be provided
  • possibly lower reputation as a trader
  • Unlimited liability

The catalog jobs of the freelancers

The listing of the liberal professions in §18 EStG is often referred to as a catalog. This in turn means that the typical activities are also called catalog professions.

These include:

  • Doctors, dentists, veterinarians
  • Lawyers, notaries, patent attorneys
  • Surveyors, engineers
  • Architects
  • Commercial chemist
  • Auditor, tax consultant, advisory economists and business economists
  • sworn auditors, tax agents
  • Naturopaths, dentists, physiotherapists
  • Journalists, photo reporters
  • Interpreters, translators
  • Pilots
  • and similar professions

The addition “and similar professions” makes it clear that this list of freelancers is by no means complete. It can be supplemented with many other activities.

If you are not sure whether you can be classified as a freelancer or not, it makes most sense to contact the tax office responsible for you. There they will take a close look at your case and decide whether you are entitled to freelance status or whether you have to register a business.

Typical disputes include graphic designers, IT professionals, and coaches.

frequently asked Questions

If you want to become a freelancer, there are a lot of questions going through your head.

You can find the right answers here.

What is the difference between freelancer and freelancer

Anyone looking for information on the subject of freelance work online will inevitably stumble across the term "freelancer" again and again. The assumption that this is the English translation is obvious - but it is wrong.

In fact, freelancers and freelancers (also called "freelancers") refer to two different forms of professional activity.

While a freelancer works scientifically, artistically, teaching, educating or writing, a freelancer is primarily characterized by his project-related work for various customers.

Which legal form can a freelancer choose?

The freelancer is not an independent legal form, but can only be understood as a kind of special status.

If you want to become self-employed, you will automatically set up a sole proprietorship.

If, on the other hand, you join forces with other freelancers, you can also found a GbR or a partner company.

You also have the option of founding a corporation - for example a GmbH or UG (limited liability). In this case, however, the privileges of not having to pay business tax and not having to do double-entry bookkeeping expire.

When do you have to register as a freelancer?

As a freelancer, you are obliged to report to the tax office no later than four weeks after starting your professional activity.

If you don't do this, you face sanctions.

When does a freelancer have to register a business?

The boundaries between freelance and business are often fluid and must therefore be treated with the greatest care.

For example, if you work as a freelance journalist and blogger and generate money (among other things) through advertising income, you have to register a business for them. If you don't do that, the tax office can later revoke your freelance status. This in turn goes hand in hand with high trade tax back payments, which in the worst case can threaten your existence.

Furthermore, the registration of a business is inevitable if you do not want to be liable with your private property. In this case, you have to set up a corporation - and this is definitely a business.

By the way: You can of course be both a freelancer and a trader. Then it is important that you clearly delimit your activities from one another and also differentiate them with regard to accounting.

When do freelancers have to keep accounts?

In principle, freelancers are not required to keep accounts. The tax office is satisfied when you submit an income surplus invoice as part of your income tax return.

An accounting obligation only arises when a freelancer sets up a business. Another exceptional case occurs if you at some point make an extremely high turnover or profit per year and the tax office therefore requires you to keep double bookings.

Why do freelancers not pay trade tax?

The trade tax is a levy that goes directly to the municipality in which a company is registered. The money is used, among other things, to maintain and expand the local infrastructure.

The fact that freelancers do not have to pay trade tax is due to the assumption that they - unlike traders - do not burden the infrastructure with heavy machinery and vehicles.

How long do freelancers need to keep tax records?

The general retention period for tax documents is 10 years.

How are freelancers insured?

You have the choice between private health insurance and voluntary statutory insurance.

If you are a freelance artist or publicist (e.g. journalist or author), it is also advisable to find out more about the artist's social security fund. This pays (almost like an employer) about half of your health insurance contributions.

Can a freelancer hire employees?

Yes, you have the option of employing employees. The best evidence of this is probably provided by doctors and lawyers who would not be able to do their jobs without a well-functioning and specialized team.

When does a freelancer not have to pay sales tax?

In order to be exempt from sales tax as a freelancer, you have to make use of the small business regulation.

However, this only applies if your annual turnover is less than 17,500 euros. In the beginning this may be a realistic amount, but if your business is to grow continuously, the small business regulation is more of a brake than a relief.

What can you deduct from tax as a freelancer?

Freelancers, like other self-employed persons, can deduct a lot from the tax - that means: the VAT paid on certain products and services can be refunded by the tax office.

The classic items that are "deductible" include:

  • Working materials
  • Work equipment
  • office
  • Company car / bike
  • Services used that relate to your freelance work
  • Business lunch

Who can become a freelancer?

In principle, anyone can become a freelancer - provided he or she meets the relevant requirements. While prospective doctors, naturopaths and lawyers have to submit appropriate certificates, a freelance photo reporter, for example, should be able to provide appropriate practical evidence.

What exactly is required for admission depends on the respective profession. Some of the catalog professions are protected in Germany, others are not.

Can you become a freelancer without studying?

Yes, this is possible in the case of most non-protected catalog professions (e.g. journalist and translator).

Summary

Above all, the elimination of trade tax and the prospects for the EÜR ensure that the status of freelancer is very popular among many founders.

Freelance work has certain advantages - but it must always be viewed as a kind of restriction. Not every (promising) business idea can be realized with it.