Self-employed in Germany
Freelancer (Freiberufler) or tradesperson (Gewerbetreibender)?
There is a lot of confusion, even among Germans, when it comes to the topic of being a self-employed (Selbstständiger) or a freelancer in Germany (Freiberufler). Many Germans aren’t sure what the difference between these two terms is. And many foreigners seem to think that it’s the same thing, however actually the difference is significant. For one, the taxation depends on which category you belong to. Also the package of documents when applying for a German residence permit would be quite different. Here we are going to explain the differences between the two terms: freelancer and self-employed in Germany (Selbstständiger).
So, what do the two concepts actually mean and what is the difference between them? Let’s start with defining self-employment in Germany and proceed to freelance in Germany.
Self-employed in Germany (Selbstständiger)
A self-employed in Germany (Selbstständiger) is a person who isn’t employed in the classical sense of it and is their own boss. You may think now that a freelancer doesn’t work for somebody else in the classical sense as well and is their own boss too, and you would be right. Freelancer is a subcategory of self-employed.
The term self-employed is divided in two general categories: tradespeople (Gewerbetreibende)and freelancers (Freiberufler). Usually, we understand by the word self-employed the first subcategory: tradespeople. So, freelancers are the second group, and there are differences in several aspects depending on whether the person is a freelancer or trader.
Freelance in Germany
Freelancers in Germany (Freiberufler) are entrepreneurs who carry out a scientific, artistic, literary, teaching or educational activity. According to Section 18 of the Income Tax Act (Einkommensteuergesetz), there are the so-called “catalog professions” (Katalogberufe) that are considered freelance professions.
Among others the list of activities available for freelance in Germany includes:
Nurses, doctors, dentists, vets,
Tax consultants, auditors, tax agents,
Journalists, photo reporters, interpreters, translators,
and other similar professions.
This is not the full list, however you can get an idea what professions belong to the category of freelance in Germany. To be able to carry out some of the mentioned activities the person needs to have an appropriate education. In some cases, an appropriate work experience has to be proved.
Watch our video to find out about self-employed and freelancers in Germany:
Difference: self-employed in Germany (Selbstständiger)and freelancer in Germany (Freiberufler)
1. So, as you can see, the first important difference between freelancers and traders is that there is an actual list of professions that a freelancer can carry out. This means that not every person can be considered a freelancer in Germany (Freiberufler).
2. The second significant difference has to do with the self-employed tax in Germany. Self-employed tradespeople (Gewerbetreibende) are obliged to pay the trade tax (Gewerbesteuer). As for the freelance taxes in Germany, freelancers are exempt from the trade tax. However please note that the final decision on whether you are a freelancer or a tradesperson is always up to the tax office.
If you consider yourself a freelancer and want to work freelance in Germany, you need to register as a freelancer with your responsible tax office. However if the tax office subsequently places you in the category of tradespeople, then you’ll have to pay the trade tax for all the time passed. It may come to that during an audit when the activity is checked by the tax office. So sometimes a couple of years may pass, and the trade tax will have to be paid for all these years.
If you want to make sure you can actually work as a freelancer in Germany (Freiberufler), it is recommended to check that with your responsible tax office at the start of your activity.
3. The third important difference has to do with application for a residence permit. The procedure, requirements and the required package of documents depend on whether you are a tradesperson or a freelancer.
Who else is considered a self-employed in Germany (Selbstständiger)?
For example, if you are a shareholder of a GmbH or a UG holding at least 50% or the shares as well as managing director of the company, you are considered a self-employed. You’ll find detailed information about the requirements and the nuances of applying for a residence permit in such a case and as a self-employed tradesperson in our previous articles. And if you are interested in learning about the freelance visa in Germany, make sure to check our article about it.
If you are interested in opening and developing your own business in Germany and getting a residence permit through business, please get in touch with us. We are happy to assist foreign entrepreneurs with opening a new chapter of their business and life in Germany.
This document (and any information accessed through links in this document) is intended for general informational purposes only and is not a substitute for professional advice. Each situation is unique and professional advice should always be obtained before taking or refraining from any action.