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It’s summertime and you want to start working for yourself. It’s probably a thought every person has had by now. It’s not complicated, because everyone likes to be their own boss. When it comes to what type of self-employment, you’re looking forward to the real doubts araise. Are you interested in freelancing? Perhaps.
There are three basic terms for self-employment in Germany: self-employed (Gewerbe), freelancers and freiberuflers. Although they may seem similar, the origin and, more importantly, the legal obligations of each differ. A classification also determines a business' obligation to pay trade tax (Gewerbesteuer).
In today’s article, we will be explaining what these terms mean and how they differ. How exactly are these terms differentiated according to German law? Let’s break things down, first things first;
What does Self- employment mean in Germany?
Being self-employed simply means not having to work under anyone. Your business, your goals, you profits/losses. It’s all on you. As mentioned earlier, the term self-employment can be divided into three terms;
- Freelancer (Freier Mitarbeiter)
- Freelancer (Freiberufler)
- Tradespeople (Gewerbe)
Who is a Freelancer?
In Germany, ‘freelancers’ refer not to the type of business they run but to how they conduct their professional relationships with clients. Unlike employees of companies, freelancers receive work orders from different companies or clients.
Freelancers work primarily during a project, or support a business in certain tasks and challenges. It is up to them how they manage their time, workload, and working environment.
Who is a Freiberufler?
A Freiberufler is the title for self-employed professionals who have certain qualifications and who sell their services. They generally run an independent business, firm, or studio where clients come to receive services. Typically, their clients are end-users. For example, patients who seek medical care from a physician.
Germany considers a Freiberufler to be someone who practices so-called ‘liberal professions’ (Freie Berufe).
What are liberal professions?
The Income Tax Act includes liberal professions in Section 18. The official act is only available in German, but you can read it in English using Google Translate. They are broadly classified into two categories namely;
(Katalogberufe) – Some of the professions that are considered under catalogue professions are
- Education/cultural professions: Journalists, photojournalists, Interpreters, translators, artists, Writer, teacher and educator
- Medical professions like doctors, dentists, veterinary, physiotherapists, midwives, masseurs, psychologists
- Legal, tax and business advisory professions: Lawyers, patent attorneys, notaries, auditors, tax consultants, consulting economists and business consultants
- Scientific/technical professions: Surveyors, engineers, chemists, architects, pilots, full-time experts.
(Ähnliche Berufe)- Some independent professions whose activities are similar to the catalogue professions are also considered as frei berufe. These professions are also called: analogous professions.
(Tätigkeitsberufe) – scientific, artistic, or other professions carried out independently, writing, teaching or educational activities.
The liberal professions also include a number of ‘similar occupations’. For your job to qualify as a similar occupation, your training and specific professional activity must be comparable to a catalogue job.
Freiberufler Vs. Freelancer
All freelancers are self-employed people, but not all self-employed people are freelancers in Germany
There are a few benefits to being a freelancer:
- You do not need to register in the Handelsregister, the German Trade Register1.
- You do not need a trade licence (Gewerbeschein)
- You do not need to pay the trade tax (Gewerbesteuer)1, 2.
- You do not need to use double entry bookkeeping.
What is a Gewerbe (Trade)?
If you are a self- employed person and you do not fall under the catergory of freelancers, you are a tradesperson (Gewerbetreibende). You carry out trade on your own account, under your own responsibility, and for the purpose of gaining a long-term profit.
It is a legal requirement for tradespeople to register as businesses. Almost all self-employed persons (including freelancers) must register with the tax office (Finanzamt) by filling out a questionnaire for tax registration.
Requirements if you are a Gewerbe
- You must register yourself with a Handelsregister
- You must apply for a trade license
- You are obliged to maintain a double entry bookkeeping