How to become self-employed in Germany

Would you like to become self-employed but don’t know how or where to start? You’re in the right place! This page provides all the information you need about becoming self-employed and registering your business, along with helpful tips on what to consider.

From generating initial ideas to filling out the tax registration form, choosing the right legal structure, and filing your first tax return as a self-employed professional, we answer all the big and small questions about self-employment and starting your own business in Germany.

Here you find an overview of this page’s topics:

• What kind of business can I start in Germany?
• Registering for self-employment step by step: The tax registration form
• Which legal form is the right one?
• Freelancer or business – what am I?
• Freelancer and business at the same time: Is that possible?
• What taxes do I have to pay as a freelancer?
• What taxes do I have to pay as a Gewerbe (trade)?
• How do I register a business?
• What is a Kleinunternehmer (small business)?
• How do I write invoices?
• Do I need a business bank account?
• Do I need a tax advisor?
• Insurance for the self-employed: what do I really need?
• How does pension provision work for freelancers?
• How do I calculate my profit?
• How much do self-employed people have to set aside for tax?
• What are the tax deadlines?
• What is VAT?
• What are tax allowances?
• What can I deduct from tax?
• Tools for self-employed professionals

What kind of business can I start in Germany?

There are many ways to become self-employed in Germany. Your choice depends on your unique situation. You might already have a unique idea that you want to pursue, or you may wish to further your education in a different field to earn your income. Regardless of the path you choose, if you bring enough motivation, there are numerous opportunities to work as a freelancer in Germany.

➡️ Looking for business ideas? Here are 7 side jobs you can start to become self-employed in Germany.

For many aspiring freelancers, starting with a side job is a good option. It allows you to test the waters without taking on the full financial risk immediately.

Create a Solid Business Plan

A solid foundation for starting your own business is a business plan. In it, you define your business idea and explore all the potential opportunities and risks your business might face over time. Additionally, it serves as a basis for potential investments in your company from banks or other financiers. Here are 5 tips for creating the perfect business plan.

How to register for self-employment in Germany

To work as a self-employed professional in Germany, you must register your self-employment. You need to fill out the tax registration form, known as the “Fragebogen zur steuerlichen Erfassung,” and send it to your local Finanzamt (tax office). Afterward, you will receive your new Steuernummer (tax number), which allows you to operate as a self-employed individual. This requirement also applies if you are starting self-employment as a side job.

➡️ Learn everything about the different tax numbers in Germany.

You can easily fill out the “Fragebogen zur steuerlichen Erfassung” online and send it to your Finanzamt. It usually takes about two to four weeks to receive your new Steuernummer and officially start working as a self-employed professional.

Key steps to registering for self-employment in Germany

1. Fill Out the Tax Registration Form: Complete the “Fragebogen zur steuerlichen Erfassung” online and send it directly to your Finanzamt.
2. Receive Your Tax Number: Wait approximately two to four weeks to receive your new tax number.
3. Start Working Self-Employed: Once you have your Steuernummer, you can officially begin your work and send legal invoices to your clients.

Registering for self-employment step by step: The tax registration form

As mentioned, in order to register your self-employment with the tax office (Finanzamt). This is done through the tax registration form, known as the “Fragebogen zur steuerlichen Erfassung,” which you can fill out online here. With this form, you officially register as self-employed and receive your tax number, allowing you to issue invoices.

Information Required in the Tax Registration Form:

• Name, address, email, and date of birth
• Description of your self-employed activity
• Expected income from your self-employment
• Choice of profit determination method
• Are you a small business owner (Kleinunternehmer)?
• Do you need a VAT identification number?
• Expected profit from your self-employment (Here we explain how to calculate your profit)
• Other sources of income
• Your bank details

➡️ Find a step-by-step guide to filling out the tax registration form here.

Key Steps to Registering for Self-Employment in Germany

1. Fill Out the Tax Registration Form Online: Complete the “Fragebogen zur steuerlichen Erfassung” with the required information.
2. Submit the Form to the Tax Office: Send the completed form to your local Finanzamt.
3. Receive Your Tax Number: Wait for approximately two to four weeks to get your tax number.
4. Start Issuing Invoices: Once you have your tax number, you can officially start issuing invoices and operating as a self-employed individual.

Explore our resources and guides to ensure you have everything you need to successfully register and start your self-employment in Germany.

Which legal form is the right one?

As a self-employed person, you need to decide on a legal form. If you are starting your own business as a service provider, you will probably be a sole trader – and this is actually the most common legal form for freelancers and businesses. You don’t need any minimum capital for this.

There is also the option of setting up a partnership or a civil law partnership (GbR). These are two options for freelancers to work together with other members of the so-called liberal professions. We explain what liberal professions are below.

There is also the limited liability company, GmbH. To set up a GmbH, you need a minimum capital of €25,000 and must also be entered in the commercial register. One of the biggest advantages of a GmbH over the other legal forms is that you are not liable with your private assets if the company gets into debt or has to file for insolvency.

Freelancer or business – what am I?

Before you can get started with your self-employed activity, you need to know whether you are considered a freelancer or a business. This determines how you register your self-employment: Freelancers only need to complete the tax registration questionnaire, whereas tradespeople must also register with the trade office.

You cannot choose whether you practise a freelance profession or run a business. Rather, this is determined by the nature of your activity and is clearly defined in the Income Tax Act.

Freelancer:

‘Freelance work includes independently practised scientific, artistic, literary, teaching or educational activities […]’ §Section 1 8 para. 1 no. 1 EStG.

The professional groups that are regarded as self-employed include doctors, lawyers, engineers, tax consultants, journalists and also alternative practitioners and physiotherapists.

Gewerbe (Trade):

‘An independent sustainable activity that is undertaken with the intention of making a profit and constitutes participation in general economic transactions is a commercial enterprise if the activity is neither to be regarded as the exercise of agriculture and forestry nor as the exercise of a liberal profession nor as other independent work. § Section 15 para. 2 EStG’

Typical trades are, for example, craft and industrial businesses, commercial enterprises and activities as intermediaries or catering businesses. In addition, GmbHs or AGs are always considered a trade regardless of their activity.

➡️ Still not sure whether you are a freelancer or run a business? You can find the most important facts here.

Freelancer and Gewerbe at the same time: Is that possible?

In principle, it is perfectly possible to register and carry out both a business and a freelance activity. However, you will have to register with the tax office twice and fill out the tax registration questionnaire twice – once for each activity.

You may also receive a separate tax number for each activity. In this case, you will also have to submit several tax returns. Only if your freelance and commercial activities are very similar can you use one tax number to account for them.

What taxes do I have to pay as a freelancer?

If you are a freelancer, you only have to register via the tax registration questionnaire. This means that you do not have to register a business as a freelancer and freelancers do not have to pay trade tax.

However, other taxes are relevant for freelancers: You have to submit your income tax return once a year.

With a few exceptions, freelancers are also subject to VAT and must submit and pay their advance VAT return on a monthly or quarterly basis.

What taxes do I have to pay as a Gewerbe (trade)?

The taxes for tradespeople are roughly the same as those for freelancers – with one exception. In addition to income tax and VAT, tradespeople must also pay trade tax. This is paid to the responsible municipality and relates to the profit of the business.

Depending on the municipality, there is a trade tax assessment rate that calculates the amount of trade tax. However, as with income tax, there is also an allowance for trade tax: according to the Trade Tax Act, this is €24,500 in 2021.

If you are not registered as a sole trader, but set up a so-called corporation, such as a GmbH or UG, corporation tax is also payable.

How do I register a business?

To run a business, you must register your commercial activity. You do this by submitting the tax registration questionnaire and by registering with the trade office. You can do this in person or in writing and in some cases you can also register a business online.

As with the tax office, which trade office is responsible for you depends on where you live. The costs for registering a business also vary from place to place: they currently vary between €20 and €65.

The necessary documents for registering a business include a completed registration form.

➡️ Here you will find a step-by-step guide to completing the business registration form.

What is a Kleinunternehmer (small business)?

If you are self-employed in Germany, you generally have to pay VAT. However, there is one exception: if you make use of the so-called small business regulation, you are exempt from paying VAT. This means you can offer private customers lower prices and also have less bookkeeping work as you do not have to submit advance VAT returns.

You are classed as a small business owner if you did not earn more than €22,000 in your first year of self-employment and your income does not exceed the €50,000 limit in the following year.

➡️ Here we explain what happens if you do exceed these limits.

You can either register as a small business directly when you register your self-employed activity via the questionnaire for tax registration or you can apply for this at a later date at your local tax office.

➡️ Not sure whether the small business regulation is right for you? In this article, we show you when it is worth applying for the small business regulation – and when it is not.

How do I write invoices?

As soon as you have completed your first assignment, you can issue your first invoice as a freelancer. You must make sure that the invoice is legally valid and contains all the important information about you, your client and the order.

Your invoice must contain the following information:

Your name and (professional) address
The name and address of the invoice recipient
Your tax number or, if applicable, your VAT identification number
The date of the invoice
A consecutive invoice number
The quantity and a description of the goods supplied or the type and scope of a service provided
The price for the services listed
The date of delivery or provision of the service (it may also be sufficient to indicate that the service date is identical to the invoice date)
If applicable, the VAT rate for the services provided
If applicable, details of any agreed discounts
If applicable, information on tax exemption (if you are a small business owner)

➡️ Click here for the free freelancer invoice template. Or simply create a free Accountable account and start writing invoices directly in Accountable.

Freelancers must issue their invoices no later than 6 months after the service has been provided – but only if the invoice is issued to a company. There is no deadline for invoices to private individuals.

➡️ Find out what else you need to know about invoicing as a freelancer here.

Do I need a business bank account?

As a freelancer, you don’t necessarily need a business account, but it can be beneficial to separate your business and private transactions. This gives you a better overview of your finances and makes it easier to put your taxes away. There are also a few banks that even prohibit the business use of a private account.

➡️ Here you can find an overview of the best business accounts for freelancers.

➡️ Read this article to find out what you need to know about your bank account as a self-employed person.

In addition, a business account also potentially makes work easier for your tax advisor.

Do I need a tax advisor?

As a self-employed person, you don’t necessarily need a tax advisor. However, you are solely responsible for managing your taxes – and with all the different laws and tax regulations, it’s easy to lose track.

Whether you need a tax advisor therefore depends mainly on your own requirements, your level of knowledge and your time. There is also no income threshold above which self-employed people need a tax advisor.

Advantages of a tax consultant:

• More time for your actual work
• Save money with tax tricks
• A professional answers your questions
• Less potential for errors in your tax returns
• Disadvantages of a tax consultant:

• The costs
• It can be difficult to find a suitable tax advisor
  

Insurance for the self-employed: what do I really need?

Without health insurance, nothing works in Germany – regardless of your employment status. One difference, however, is that self-employed people have to take care of their own health and long-term care insurance and pay the full amount themselves. You have the choice between statutory or private health insurance. For many freelancers, the Künstlersozialkasse (KSK) is also a good option, which you can find out more about here. Which option you should choose depends on your individual situation, e.g. your income, what risk cover you want, etc.

➡️ You can find out more about health insurance in Germany here.

Your health cover as a self-employed person usually also includes occupational disability insurance, which can secure your livelihood in the event of long-term disability.

Professional liability insurance is also important, as it can protect you against claims for damages that may arise in the course of your self-employed work. This is especially true if you are in a profession where personal injury or environmental damage can occur in addition to pure property damage. Another option is financial loss liability insurance, which is even mandatory in some self-employed professions.

Finally, you should also prepare for old age and look for pension insurance. Because while employees are compulsorily insured here, you have to take care of this on your own. More on this in the next chapter.

How does pension provision work for freelancers?

If you take care of your pension early enough, you will have fewer worries in old age, which is why you should not postpone the issue unnecessarily. As already mentioned, self-employed people are generally not automatically compulsorily insured. However, there are a few exceptions, as there are self-employed activities in which you are obliged to pay into the pension fund. These include, among others:

• Teachers
• Midwives
• Carers
• Craftsmen
• Artists and publicists who are insured with the KSK
• and many more.

All other self-employed persons do not have to pay into the statutory pension fund, but can do so voluntarily. However, the only requirement for this is that you regularly transfer a certain minimum amount and never miss a payment.

Alternatively, there is also the option of paying into a private pension scheme to secure your pension as a self-employed person. Unlike statutory pension insurance, the contributions are not directly allocated, but saved or, depending on the plan, invested.

➡️ You can find an overview of the different pension insurance schemes in this article.

How do I calculate my profit?

As a self-employed person, you must document to the Finanzamt (tax office) how your operating profits are calculated. There are two different methods to choose from for calculating profits as a freelancer:

Double-entry bookkeeping (Bilanzierung)
Double-entry bookkeeping, called Bilanzierung, is a complex procedure that not only compares income and expenses, but also includes fixed and current assets as well as equity and borrowed capital.

Die Einnahmenüberschussrechnung (EÜR)
The revenue surplus calculation, also known as EÜR for short, is a simpler method of calculating your profit. You can use this formula to easily calculate your profit:

Income – Expenses = Profit

As a freelancer, we would recommend using the EÜR, as it is far simpler than double-entry bookkeeping.

💡Please note: Tradespeople who are entered in the commercial register, have an annual turnover of more than €600,000 and whose annual profit exceeds the €60,000 threshold are automatically required to keep accounts and cannot choose how they calculate their profit.

The EÜR must be submitted once a year, together with the annual income tax return.

➡️ Here you can find detailed instructions on how to submit the EÜR online as a freelancer.

How much do self-employed people have to set aside for tax?

No matter which self-employed activity you pursue, you have to pay income tax in any case. For employees, this is deducted directly from their salary and only the net amount is ultimately transferred to their account. Self-employed people, on the other hand, have to calculate their taxes themselves and transfer them to the Finanzamt (tax office) with their tax return. The applicable tax rate is based on a percentage of income, but the maximum tax rate is 42% in Germany.

The income tax calculator from the Federal Ministry of Finance tells you what percentage of your income you should set aside for income tax.

It is important to know that income tax is based on profits. It is therefore important to declare all business expenses correctly and in full in your income tax return in order to minimise your tax burden.

Watch out: As soon as you have been self-employed for one or two years, the tax office will probably set tax prepayments for you that you have to pay over the course of the year. The amount of your tax prepayments is calculated on the basis of your past income tax returns.

➡️ Tax prepayments: What you need to know!

What are the tax deadlines?

In Germany, taxes are settled for the period from 1 January to 31 December. This period is known as the financial year. You then usually have until 31 July of the following year to file your income tax return (this date can vary).

If you are late or cannot meet the tax deadline for other reasons, it is possible to extend the tax deadline. All you need to do is send an informal letter to the Finanazmt (tax office) responsible for you. However, you should send this early so that you do not have to pay any penalties for late submission.

💡Did you know that Accountable always reminds you of your tax deadlines and even would cover possible penalty costs under the Accountable Tax Guarantee?

➡️ You can find out which other tax deadlines you should be aware of here.

What is VAT?

With the step into self-employment, many freelancers also have to deal intensively with the topic of VAT (value added tax) for the first time, which every self-employed person and entrepreneur in Germany who is not considered a small business owner must pay.

To make it as easy as possible for you to start working independently – or to switch from small business to regular taxation – we have put together a page where you can find all the information you need about VAT. No worries, it’s not as complicated as you might think.

What are tax allowances?

There are various tax allowances that self-employed individuals can apply depending on their personal or professional situation, leading to a reduction in their tax burden. The current tax-free allowance is €11,604. For business owners, Gewerbesteuer (trade tax) is only applicable on profits exceeding €24,500 per calendar year.

There are also other allowances that can save you money, such as the child allowance and the single parent relief amount.

➡️ Here you can find the most important tax allowances for self-employed persons.

What can I deduct from tax?

But tax allowances are not the only way to save tax, of course. In fact, there is a whole range of so-called business expenses that you can deduct from your tax bill.

Here is a list of examples of what you can deduct:

• Insurance costs
• Training and further education
• Costs for a tax consultant or lawyer
• Travelling expenses
• Workplace costs such as telephone and internet costs
• Advertising costs
  

You can also deduct many of the costs you incurred before registering your self-employment from your tax bill. In this article, we explain which costs are recognised by the Finanzamt (tax office) and how you can claim them for tax purposes.

➡️ Here you can find more information on the individual business expenses and how you can deduct them.

➡️Or use the Accountable deductible search engine

Tools for self-employment professionals

As a self-employed person, you have to deal with all kinds of income and expenses and invoices also have to be sent and paid regularly. Fortunately, you don’t have to keep a manual list or painstakingly update an Excel list to keep track of your finances and taxes.

With the Accountable tax app and software for freelancers, you can do all your bookkeeping digitally and even send invoices directly to your clients. Accountable also allows you to automatically create all your tax retunrs like your income tax and VAT return and send it to your FInanzamt (tax office) with just one click! Test it now for free!