7 mistakes to avoid when starting out as a Freiberufler in Berlin

Working as a Freiberufler – or freelancer – in Berlin means diving head-first into the creative capital. But it also means getting your head around a number of accounting processes in order to keep your business running smoothly.

Here we’ve collected the most common mistakes freelancers make when getting started in Berlin, in the hopes you can learn from them and have an easier ride as you set up your freelance business in the Hauptstadt.

Not keeping receipts for your business expenses

As you may have already noticed, Germany is far from being a paperless society. And for the Finanzamt (tax office), paper is king.

For any business expense you hope to claim as a tax deduction, you must keep a paper copy of your receipt, so you have the necessary proof if you are audited, something that happens to a small number of people who file their tax returns each year. You are legally obligated to keep your receipts for 10 years.

The Accountable app enables you to scan your receipts and store them all in one place in the cloud.

Not asking for the right kind of restaurant receipt: a Bewirtungsbeleg

If you meet a client for a meal, you will want to deduct the meal as a business expense. But one mistake that many new freelancers make is not getting the correct type of receipt.

When you are dining out, it is not enough to obtain the regular sales receipt (Rechnung) if you wish to claim it as an expense. In this case, you need to ask the waiter for a Bewirtungsbeleg, or official restaurant receipt.

A Bewirtungsbeleg must include the following:

• Date, place and reason for the meeting – what business was discussed
• The person who hosted and is paying for the meal – remember that you can only claim the meal as an expense if you are paying for yourself plus at least one other person outside your business, so no splitting the bill!
• Your guest’s name and company
• The total cost
• Any tip you added on top

Not submitting a complete invoice

In Germany, invoices need to tick a number of boxes in order to be considered complete. Most clients will be well-versed in this area and are likely to let you know if your invoice is missing something, often delaying payment for your work.

Make sure you’ve got it right the first time by ensuring your invoice has all of the following:

• Name and address of both yourself and your client
• A unique invoice number
• Invoice delivery date
• Your Steuernummer and VAT number (Umsatzsteuernummer in German)
• The VAT number of your client – use this tool from the European Commission to check a client’s VAT number
• A description of the work you are charging for
• The price per unit (this can also be per hour) and the total amount charged
• Your bank details
• And finally, your signature

Alternatively, try Accuntable’s template for flawless invoices.

Not charging VAT from the start

If you think you may be liable for VAT, or value-added tax, it pays to find out for sure before you start invoicing your clients.

If you realise later on that you should have collected VAT from a client, it can be very difficult to get the client to cough up if they have already settled your invoice. In that case, you will end up footing the VAT bill yourself.

Clients should have no trouble paying VAT when you add it to your invoice up front, as they can deduct this cost from their own VAT return later. Just save yourself and your clients the headache and make sure you’ve got your VAT sorted before you send out your first invoice.

Accounting got your head in spin? Let the Accountable app take the headache out of managing your taxes.

Not saving up enough income tax

Many Berlin freelancers will tell you that the first year is the hardest, owing to one fairly challenging task.

As a freelancer in Berlin, you will not pay any income tax during your first year of freelancing, as the Finanzamt needs to see a whole year’s worth of your invoices before it knows how much to charge you. For this reason, you must save up an entire year’s worth of income tax, ready to pay once your tax return is completed sometime the following year.

So how much might you owe? Income is taxed progressively in Germany, meaning the more you earn, the higher the percentage of your income is due as income tax. This applies for any income over and above the income tax-free threshold, which is 9408 EUR for 2020. 

This table can help you figure out how much income tax you will owe – look at the Gesamt Steuer column to see your total tax burden, including the mandatory solidarity surcharge. Of course, you can reduce your tax burden by deducting business expenses.

Not deducting your business expenses

If you haven’t freelanced before, you might not yet have a sense of which business costs are tax deductible. You can significantly reduce how much income tax you owe by deducting relevant business costs.

From gear to office space, client meals to insurance, here are 7 of the most common tax deductions.

As your business grows and you become more confident, you may come across expenses that look like they could be tax deductible, but you aren’t certain, such as travel that is a combination of business and pleasure. Knowing how to account for per diems allowances in that case can be tricky.

💡 Tip from Accountable: For any curly costs, plug them into Accountable’s handy expenses search tool and get an instant answer to your query.

Not having enough clients 

Sometimes freelancers will end up with one steady, well-paying client that makes it really easy to cruise along without finding any supplementary clients.

That sounds great, right? Unfortunately, as a freelancer, it can present you and your clients with major problems. In Germany, freelancing for just one client is called Scheinselbständigkeit – you’re operating as a freelancer in name, but working for just one client in practice. It’s a bit like being an employee, minus any employee benefits.

In Germany this is illegal, as businesses are required to support their staff with benefits including paid holiday and sick leave, as well as unemployment insurance and work contracts that help keep workers safe. If someone wants to hire you for a large portion of your work week, they must pay for the privilege by covering these costs for you. As a freelancer, you cover all those costs – and risks – yourself.

In order to avoid slipping into Scheinselbständigkeit, it pays to have at least 2-3 clients. This will also help spread your risk in case one of your contracts comes to an end. Then you’ll always have another couple of clients to fall back on.

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Avoid these common perils and you’ll be well on your way to running a successful freelance business in Berlin. Viel Erfolg!