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What you need to know about being self-employed in Germany

April 7, 2021

To get some good information that helps you in this new adventure, today we’re focusing on Germany! Large cities here, especially Berlin, are known for attracting self-employed talent from all over the world.

Let’s start from the beginning🏁

First things first, to work in Germany you’ll need to be legally registered. This is known as doing your Anmeldung. If you’re a EU citizen, you automatically have a valid residence permit. If not, you’ll need a certain visa to live here, so make sure to do your research.

Another important thing to keep in mind is that you can actually work as self-employed alongside a full time job, but only for 18 hours on top of your regular employment.

Freelance or self-employed?🤷

In Germany, there’s actually a difference between being self-employed (Selbstständiger) and a freelancer (Freiberufler).

Self-employed people need more documents when applying for a residence permit compared to freelancers. That’s because as a freelancer you work for various businesses as an individual. If you’re self-employed, you work for different clients as an actual (official) business. Make sure you understand what your personal situation is and what works best for you.

What kind of freelancer are you ❓

Things don’t stop at differentiating between self-employed and freelancer. Are you a Freiberuflich or a Gewerbetreibende? Stick with us, we’re getting there.

A Freiberuflich (or freelancer) is usually linked to a scholar or creative service. The actual occupations vary greatly: from artists, to doctors, lawyers or programmers. You can find a complete list of the professions included here.

A Gewerbetreibende (or tradesman business) refers to occupations that don’t fit the list above. Usually, this includes companies related to building, trading or selling physical things.

Register your business 🧑‍💼

If you’re a freelancer, you need a questionnaire called Fragebogen zur steuerliche Erfassung. Through it, you let the authorities know that you plan to become a freelancer in Germany. This form needs to be submitted electronically to your local Finanzamt.

If you’re registering as a tradesman, you register at your local Gewerbeamt. You need to complete this step before heading to the local Finanzamt.

Sort your health insurance 🏥

As in many countries, being insured is mandatory in Germany. As a self-employed person, you need to figure this out on your own.

First of all, you need to decide if you’re going with public or private health insurance. Public health insurance will cost you around 15% of what you earn, set at a minimum of monthly €350. This also covers your spouse and kids.

The private insurance is more personalized, which means the price is calculated based on your age and medical needs. Usually, this only covers yourself. If you're young, healthy and have a small family, private insurance may end up costing you less money.

On to the fun stuff - taxes! 💸

As a self-employed person, you’ll have to add V.A.T. (Umsatzsteuer or Mehrwertsteuer) to your invoices. This is set at 19% or 7%, depending on your case. It’s meant to cover what you need to deliver a service. Paid more than you receive back through V.A.T.? The Finanzamt will refund you the difference. You could also be exempt from V.A.T, through something called Kleinunternehmerregelung. This means you don’t need to bill clients extra, but you also cannot deduct anything for things or services you purchased for your job (think travel expenses, equipment, etc).

Based on your income, you may not have to file your V.A.T. at all. Keep in mind that if you work with international clients from other EU countries, you’ll most likely need a V.A.T. number though.

Second, you’ll have the income tax, applying to everything you earn with your business. You’ll be taxed for every euro you make over €9,408 per year. Declare this before the 31st May of the following year.

For tradesman businesses , there’s a different tax that applies on your turnover for the year. If it’s less than €24,500 per year, you don’t have to pay it. Declare this before the 31st May of the following year.

And lastly...choose the right business account 🌈

Being self-employed in Germany (or anywhere) will require a good amount of time and energy, so you can make that dream business of yours work. There’s no need to waste any of it on bureaucracy or banking.

Having the right bank account that saves you time and makes everything easier is essential. A bunq business account will help you end manual bookkeeping, manage invoices effortlessly and always have a clear overview of your finances. Oh, and it takes 5 minutes to open an account, from the comfort of your own home. Learn more about why this could be a great choice for you here.

There we go! Everything you need to know about being self-employed in Germany! 🙌

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