Contents
Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
What is a Freelancer in Germany?
A freelancer is a self-employed person who works contractually on assignments for a client. A freelancer is never an employee of a client and therefore operates independently and is not liable to pay social insurance. Unlike employees, these external contractors have no integration into the work processes of their clients. And they can work for different clients in parallel unless contractually working exclusively on a particular project.
Freelancers can offer their services to any organisation using various models:
- Individual or recurring assignments/tasks
- Contract work on a project basis over a longer period of time.
Depending on the contract with the client, remuneration is via a lump-sum payment or on a fee basis. But, it depends on the type of work and the custom of the respective industry.
Understanding freelancing in Germany
As a freelancer in Germany you:
- are self-employed;
- are not bound by instructions like an employee;
- decide your working hours and place of work;
- have no obligation to pay social security;
- work contractually for a limited period of time; and
- have multiple clients that you’ve independently acquired.
Freelancer vs. Freiberufler: What’s the difference?
Often “Freiberufler” is incorrectly translated as “freelancer” in English, which causes a lot of confusion. In Germany, the term Freiberufler applies only to a number of legally defined occupations known as the “Katalogberufe” (“liberal professions”) such as doctors, journalists, lawyers or architects. Their special designation means Freiberufler enjoy advantages under German tax law.
Unlike the term “Freelancer”, the term “Freiberufler” doesn’t imply anything about a working relationship. In contrast, the term Freelancer only ever points to the type of working relationship, but not about the occupation or membership of a professional group.
So while Freiberufler can also be freelancers, not all freelancers are Freiberufler.
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Can a Freiberufler be a Freelancer at the same time?
Yes, freelancers can be Freiberufler and vice versa. For example, a tax adviser can work as a freelancer and have the tax status of a liberal professional.
How to register as a Freelancer in Germany
As you are self-employed as a freelancer, you must take the correct bureaucratic steps before starting your business. At this point, there are two options:
Freelancing as a Freiberufler
If you wish to start working in a Katalogberuf occupation (according to § 18 Paragraph 1 of the Income Tax Act) the first step is to notify the Finanzamt (tax office) of your business and ask for a tax number. Expect a receive a questionnaire for tax registration, which you must complete and return to the tax office with the requested documents.
If you are granted the Freiberufler (liberal profession) status, you’re exempted from Gewerbesteuer (trade tax) and therefore from registering with the Gewerbeamt.
Freelancing as a non-Freiberufler
If your line of work isn’t a Katalogberuf, you have to do a Gewerbeanmeldung which registers your business with the Gewerbeamt before you start freelancing. After that, you’ll be sent the tax registration form. Because you’re not a Freiberufler the tax office will assign you a “gewerblich” (commercial) tax status. This means you have to pay Gewerbesteuer (trade tax) on your business income.
Advantages and disadvantages of being a Freelancer
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Risk of Scheinselbständigkeit (false self-employment)
As a freelancer, you must be vigilant about the risk of false self-employment.
For example, if you’re integrated into a company like an employee but have a freelancer contract – the tax office will suspect false self-employment.
Other situations that make the tax office suspicious include working for mostly one client or generating most of your income from a single client.
False self-employment can have serious consequences. Your client will have to pay social security contributions for you retroactively. And the authorities may revoke your self-employed (and possibly Freiberufler) status.
Checklist to avoid false self-employment
The following checklist points to whether you’re a false self-employed person or not from the perspective of the German Pension Insurance Federation (Deutsche Rentenversicherung Bund):
- Do you work for a single client?
- Do you work almost exclusively on site for a company?
- Do you generate more than 5/6 of your turnover p.a. from one client?
- Do you work alone and don’t employ employees subject to social security contributions?
- Are you authorised by the client to give instructions?
If “yes” is the answer to the majority of these questions, you are probably a falsely self-employed person. However, always bear in mind: If the authorities initiate a procedure to determine your employment status, the individual working relationship you have with each client will be put under the microscope. The number of clients is a secondary criterion.
Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
Advantages and disadvantages for clients of freelancers
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What you should pay attention to in a freelancer contract
Familiarise yourself with the sample contracts for freelancers that many chambers of commerce and industry offer for download. In parallel, you should draw up a checklist with all the criteria that are particularly relevant for ruling out false self-employment. A list of signs that are used for the Clearing House’s assessment can be found here. These are precisely the points you should discuss when concluding the contract and record in the contract.
Freelancers and client acquisition
Freelancers can get new jobs or assignments in a variety of ways.
Portals
The most popular marketplace for jobs are freelance platforms. Here, freelancers can acquire clients both nationally and internationally. Note, however, that especially on the globally networked freelance portals, unhealthy price dumping is commonplace. The registered freelancers regularly undercut each other there to land as many clients as possible. When choosing a freelance platform, you should therefore pay close attention to the terms of use.
Social
As a freelancer, you can also use social networks as a presentation platform, because potential clients can also be found here who would not have become aware of your work otherwise.
Recommendations
Freelancers also rely largely on referrals and word of mouth to acquire clients, so having your own website and attending networking events is always recommended.
Website
Having your own search engine optimised website not only looks reputable but can get you clients without having to spend money monthly on Google Ads or other marketing efforts. In many industries, a professional website is equivalent to a business card.
Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
Our Einzeluntern (sole proprietorship) series:
1. What is an Einzelunternehmen?
2. What is a Freelancer?<<<
3. What is a Kleingewerbe?
4. What is a Freiberufler?
5. The pros and cons of the Einzelunternehmen
6. How to set up an Einzelunternehmen
The Master list of all Company Formation articles can be found here.
