Freelancing is a unique form of self-employment. From a legal and tax perspective, freelancers differ from traditional business owners. Interested in simpler bookkeeping and exemption from business (trade) tax? Those are among the key benefits of freelancing.
To start your freelance career, you must work in a profession listed in Germany's official catalog. In this article, discover which professions qualify and how to register as a freelancer.
Freelancers are independent individuals who work on their own account in various fields like journalism, consulting, design, IT, and many others. Without being tied to a fixed employer, they offer their expertise and services directly to clients or companies.
This way of working offers flexibility regarding work hours and locations, yet it also requires taking responsibility for matters like taxes and social security.
Freelancers are thus responsible for their career progress and ensuring their income.
Is freelancing the same as being self-employed?
Freelancing isn't the same as self-employment, even though both fall under the umbrella of self-employment. Freelancers typically engage in academic, artistic, or literary activities and don't need to register a business, whereas self-employed individuals cover a broader range of activities and often must register a business.
Registering as a freelancer is a crucial step towards self-employment that requires careful planning. In just five steps, you can lay the foundation for your freelance career. The process involves legal, financial, and organizational aspects that are essential for a smooth start to your activities.
The first and perhaps most important step is to register your activity with the tax office. This is done using the questionnaire for tax registration, which you can submit either online via the ELSTER portal or in paper form.
Here you provide information about:
This registration should ideally take place before you start your business activity, to stay on the right side of tax laws.
In certain freelance fields, it's necessary to prove your professional qualification. This can be done through university diplomas, certificates, or other evidence.
Proving your qualifications is particularly important if your work requires specific knowledge that is legally regulated, such as for doctors, lawyers, or tax advisors.
Ensure that you have all relevant documents ready and can present them to the tax office or other institutions if needed.
As a freelancer, you bear the full responsibility for your social security. This includes:
Get thorough information on your options and choose the insurance that suits you best. It might be wise to seek individual advice from a professional advisory center to find the optimal insurance coverage for your specific needs.
Depending on the field of work, it may be necessary to register with a professional association. These associations are providers of statutory accident insurance and offer protection against workplace accidents and occupational diseases.
Membership is mandatory for some professional groups, while it may be optional for others. Check whether and which professional association is responsible for your activity, and register if necessary. This provides you with additional protection in the event of a workplace accident.
Although it isn't legally required to maintain a separate business account for your freelance work, it's strongly recommended.
A freelancer account helps you clearly separate business and personal transactions and simplifies your bookkeeping and tax processing.
Many banks offer special business accounts for freelancers tailored to their needs. Compare offers from different banks to find the right account for you.
Still looking for the right account for freelancers? Try Qonto free for 30 days.
The main difference between freelance and commercial activities lies in the type of professions practiced and the associated tax treatment.
Freelancers are typically engaged in academic or artistic professions and do not need to register a business, which exempts them from trade tax.
Commercial operators, on the other hand, conduct a commercial activity that goes beyond the scope of freelance professions and must register their business, which entails the payment of trade tax. Additionally, commercial operators are often subject to stricter accounting obligations.
The exact classification depends on the professional activity and legal requirements.
| Criterion | Freelancers | Business owners |
|---|---|---|
Fields of work |
Academic, artistic, literary, or similar professions |
Wide range of activities beyond freelance professions |
Business registration |
Not required |
Required |
Taxes |
No trade tax, income tax due |
Trade tax and income tax due |
Accounting |
Simpler bookkeeping (income surplus calculation often sufficient) |
More extensive bookkeeping and record-keeping obligations |
Social security |
Often responsible for own insurance |
Must take care of own social security, but different rules may apply |
Flexibility |
High, regarding working hours and locations |
Varies depending on business model, often less flexible than freelancers |
In principle, almost anyone can become a freelancer, provided the activity falls under the categories legally recognized as freelance. It's also important that you have the necessary qualifications and skills to offer your services.
However, certain conditions must be met, such as registration with the tax office and, depending on the profession, proof of specific licenses or qualifications. Not every profession can be practiced as a freelance activity without further ado, and there are clear guidelines that define what constitutes a freelance activity.
Freelance activities typically include professions that require a high level of qualification and are often found in the creative industries, consulting, healthcare, and education sectors.
Here are some typical examples of freelance professions:
This list is not exhaustive, as the boundaries between freelance and commercial activities can be fluid and depend on the respective legal definitions.
How much can you earn as a freelancer?
There is no general income limit for freelancers. However, high incomes can lead to mandatory membership in the Artists' Social Security Fund or higher taxes.
You must register a freelance activity with the tax office as soon as you start your self-employed work and before you issue your first invoice. This step is crucial to be correctly recorded for tax purposes and to avoid legal issues.
Registering early ensures that you fulfill all tax obligations from the start and can fully focus on your freelance activity.
Can you become a part-time freelancer?
Yes, it's possible to work as a part-time freelancer. Many people choose this path to create an additional source of income or to pursue a passion professionally without giving up their main job. It's important to register the freelance activity with the tax office and to observe the regulations regarding social security and any employment law provisions of the main employer.
As a freelancer, you have numerous financial support options available to secure and expand your professional existence. From grants to loans to social security, the options are diverse and can be tailored to your needs. Here are some of the most important options:
Freelancing offers a high degree of flexibility and independence, but it also comes with challenges such as the need for self-organization and responsibility in financial matters. This work style opens up many opportunities but also demands a lot.
| Advantages | Disadvantages |
|---|---|
Flexibility in working hours and location |
Uncertain income |
Direct control over projects and client relationships |
Need for self-motivation |
Opportunity to specialize in niches |
Lack of social security |
Potentially higher income |
Effort required for self-acquisition and management |
No trade tax for many freelance professions |
Fluctuating workload |
If you do not register as a freelancer, you risk tax consequences and back payments.
In Germany, it's required to register your business or freelance activity with the tax office to correctly tax your income. Failure to register can lead to a tax office audit, resulting in back payments of taxes as well as possible fines and interest.
Furthermore, your legal security could be compromised, as you're not recognized as a self-employed person without official registration. Therefore, it's important to register in a timely manner to avoid legal issues.
Find the right financing
If you want to grow as a freelancer, you might need capital. With Qonto, you can easily take out a loan for self-employed individuals and invest directly in your growth.
As a freelancer, you must pay income tax on your earnings, with the tax rate progressively ranging from 0% to 45%, depending on your taxable income.
Freelancers are exempt from the local trade tax (“Gewerbesteuer”). The exact tax burden depends on various factors, including:
It is important to maintain a profit and loss statement to correctly deduct all allowable expenses from your income and thus determine the taxable income. Early planning and advice from a tax consultant can help optimize your tax burden.
