Freelancing in Germany [2024 Complete Guide] - Navigate Germany

Freelancing is touching new highs in Germany but the registration process is complex. Foreigners prefer freelancing as a source of income because of its flexibility. Remember that freelancing and self-employment are different in Germany.

Freelancing vs Self-Employment

Freelancing (Freiberufler), and self-employment (Selbstständigkeit) are different with different requirements, procedures, and taxation.

Freelancing is a liberal profession covering;

• Architects
• Bloggers
• Engineers
• Graphic designers
• IT professions
• Lawyers
• Medical professions
• Photographers
• Translators and Interpreters
• Teachers or Consultants

Things to Get a Freelance Visa

Financial Stability

Provide a proof of financial stability in the form of bank statements, or any future contracts of possible German clients.

Professional Licence

A professional licence is  mandatory for professions, such as doctors, lawyers, etc. The German government provides a beginner’s guide so you can check whether your qualifications are suited to be recognized.

Clients and Services

Provide proof that there is a demand for your skills and you have potential German clients to become eligible for a freelance visa in Germany. Proofs from your history will make it difficult to become self-employed. You can also submit a letter of intent from your prospective German clients or invoices from past German clients you have already worked with.

Health Insurance

Health insurance is mandatory in Germany, so have it before applying for a visa. Several providers offer insurance services for foreigners and freelancers have great experience with them.

Freelance Work Permit

Freelance work permit (freelance visa) is a prerequisite to get registered. As a temporary resident in Germany, visit the immigration office (Ausländerbehörde) to add freelancing or self-employment to your German residence permit (Aufenthaltserlaubnis). 

If you are an EU, EEA, or Switzerland national, you do not need a specific visa. Citizens from the US, Canada, Australia, New Zealand, Japan, Israel, or the Republic of Korea do not need a visa to enter Germany. They can travel as a tourist and apply for a residence permit for self-employment or freelancing within the three months.

A freelance or self-employment visa allow a few nationalities to get residency for freelancing or sole trading; whereas a freelance or self-employment work permit (Aufenthaltserlaubnis zur freiberuflichen oder selbstständigen Tätigkeit) offer foreigners to reside for long term and allow them to make a living.

If you are resident of any other country not mentioned above, you need both a visa and residence permit. The German embassy processes the visa, while the immigrant office (Ausländerbehörde) deals with the work permits.

Register as a Freelancer

Once you have a registered address, work permit, you need to get a freelance tax number from the tax authorities or Finanzamt. Fill a seven-page questionnaire (Fragebogen zur steuerlichen Erfassung) at your local taxation office and receive your personal freelance tax number.

Register as A Sole Trader

To register as a sole trader (Gewerbetreibender / Einzelunternehmer) or self-employed business, prepare following documents:

• Registration certificate (Meldebescheinigung)
• ID card or passport
• Qualifications or certification documents
• Police clearance certificate
• Health certificate

Visit the Chamber of Industry and Commerce (IHK) or Chamber of Crafts (HWK) website to become a member before you start trading. IHK or HWK will give you a tax registration form to fill. Mention the details about your company and projected revenue. Forms are also available online, but in-person registration will expedite the procedure. Once you receive your trading licence, download the form Fragebogen zur Steuerlichen Erfassung (tax form or the questionnaire for tax collection) from the Bundesfinanzministerium website. Fill it and submit it to the taxation office. You will receive your tax number within 1 to 2 weeks.

Taxation on Freelance Business

Freelance income is unpredictable but paying VAT tax is necessary from the beginning. Failing to do so, and passing the threshold will pile up the VAT.

Once you are a stable freelancer, your operation will get taxed with the general income tax (14-42%). When you should start paying taxes depends on predictions and professions and is decided by the authorities. They can ask to pre-pay taxes monthly, quarterly, or yearly. You can balance your tax pre-payment and actual earnings by submitting a tax declaration.

Umsatzsteuer, or Mehrwertsteuer, VAT, or value-added tax, is a sales tax at 19% on goods and services sold. In your tax questionnaire, you can request a VAT number depending on the type of services and estimated revenue. Freelance doctors or dentists do not need to pay VAT. But, other professions have to pay.

If you make less than 22.000 Euros in the first year and not more than 50.000 Euros in the second year, you don’t need to pay the VAT tax as a small business owner. Register for the VAT tax when you earn more than 22.000 Euros annually.

Finance and Accounting for Freelancers

Banking and Records Keeping

Keep your books organised for audit purpose and maintain a record of your invoices, receipts, bank account overviews, etc., in an online accounting software, bookkeeper (Buchhalter), or Bookkeeping Tool like GetSorted. You can hire an accountant / tax advisor (Steuerberater) for different services. Book appointments with Tax consultants through GetSorted and register your business.

Bookkeepers contain limited knowledge about tax affairs, accountants, and advisors are trained professionals, to guide efficiently on all taxation related procedures.

Freelancing Beside Full Time Employment

Foreigners do freelancing while working full time in another firm. It is allowed in Germany but some fundamentals are provided to maintain integrity of the system. Take freelancing as a side-hustle if your workplace allows. You are not legally allowed to work more than 18 hours a week as a freelancer, and cannot get more than your full time job.

Issue an Invoice to The Customer

Keep records of information to issue an invoice:

• Custobus’s full (business) name and address
• Description of services rendered
• Freelance tax number and VAT number
• Invoice date and number
• Net amount
• Total price and payment due date
• VAT amount if not a small business owner (Kleinunternehmer).

Separate Bank Account for Freelancing

Separate your private expenses from business expenses with a separate bank account in which you only have business payments. It will make record keeping and bookkeeping easy.

Some banks also do not allow intersection between personal and business payments due to which they can suspend it for violating the terms and conditions.

Insurance For Freelancers

Germany is the country of insurance and offers both professional and personal insurance. Register yourself as a freelancer German Pension Insurance Fund (Deutsche Rentenversicherung) depending on your income level.

If you are an artist or a publicist, including web designer, blogger, photographer, or any other profession, lower the amount of health insurance by becoming a member of artist social insurance (Künstlersozialkasse – KSK) that acts as an employer and covers 50% of the amount.

If your freelancing profession is related to the craftsmanship, teaching & education, care-taking & midwives, artists & publicists, sea pilots & coastal skippers, you must contribute to the German governmental pension fund.

Professional Liability Insurance

Professional Indemnity Insurance (Berufshaftpflichtversicherung) covers personal or property damages you, or your partner causes. According to the law, you are 100% liable to all damages. Eligibility depends on freelance profession, usually applies to doctors, pharmacists, lawyers etc. Select a module relevant to you and your business.

Scheinselbstständigkeit – Fake Claim of Self-Employment

You will get accused of fictitious self-employment, if you can’t provide evidence of having more than one client (Scheinselbstständigkeit). It will not only damage your business but increase your tax. Ensure to provide less than 83% of your services to a single client and do not get more than 5/6 of your revenue.

Final Words

Self-employment in Germany is not very friendly from registration to paying taxes. Registration process is easy but taking care of your finances, record keeping, audit, tax system, all should never be neglected.