BECOMING A FREELANCER: GERMANY EDITION.

Pierce Johnston

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Hi all, given that I have a large network based within or looking to relocate to Germany – I felt it only right to follow on from my last article about becoming a contractor in the UK, with an edition rather for those who are looking to freelance in Germany.

Keep in mind that a lot of points will be similar!

I often get asked by people who are currently in permanent employment, when the right time to get into freelancing might be and also, how to set about doing so.

This article read, should hopefully offer some insights and support for anyone who is German based and is looking to make the switch!

Is it right for you?

This is the first question you should ask yourself.

For some, a reason to freelance could be to choose their own hours – another could be for the chance to work on their own side projects.

You could also want to freelance as it will give you the opportunity to constantly work on a variety of different projects for different businesses.

Another reason and I guess more common would be for higher pay – contracts bear more risk of course but in some instances, a freelancer could be getting paid almost double what they are earning in employment – for the same position.

It’s worth mentioning that you also lose a lot of positives when you ditch permanent employment – to list a few;

  • Stability (Having continuous work isn’t guaranteed)
  • Company benefits (inc. paid leave)
  • Lack of career guidance/goal setting from others
  • Funding your own training where necessary

As touched on there, stability isn’t a guarantee. Contracts can length from anywhere as short as a month (However more typically 3, 6 or 9 months) of initial duration, up to 18 months (As per common legislation in Germany). It’s hard to foresee what gaps there might be when you will be working on a project or not – my best advice here would be to always have some savings to fall back on, both before you switch into contracting and also for between any future contract positions.

Securing a new contract

Without bias, LinkedIn has become a key resource for you in building your freelancer presence and your reputation – after all, when you freelance, your skills and experience soon become a monetary service to the clients that you work with.

LinkedIn is your online CV – it’s the first thing that most hiring managers look at, thus it is a great way to share your experience and for recruiters & hiring managers to be able to find you (Especially when your profile flags up as ‘Open to Work‘).

There are some Job Boards I would recommend also in Germany, that are great tools for finding something – I would mention JobserveFreelancerMap & Freelance.de.

As a freelancer, take into account that you will be looking for new positions much more frequently, so building relationships with great recruiters will be key. I would suggest forming long-term relationships with recruiters that you like and those who have a strong understanding and grip on the market that you’re in.

When the right thing comes up, however, it’s important to move quickly. Freelance jobs move fast. Often, if a business needs a freelancer, they need them to start ASAP. Many positions can be published on a Thursday, filled on Friday and have a freelancer in the seat by the following Monday morning…

Ensure that you are keeping an eye on your inbox (My suggestion would be to have your emails + notifications set on your phone), and should something be relevant, be sure to respond right away, with your updated CV and availability to speak if required.

Setting up

To freelance in Germany, you must register to become a ‘Freiberufler’.Freelancers in Germany are defined as those who work in so-called “Liberal Professions” (Freie Berufe), which includes people within tech.

Ultimately, the final decision as to whether a profession is considered freelance lies with the tax office (Finanzamt), which evaluates professions on a case-by-case basis. If you are unsure, consult with your local tax office.

Residence permit

Before you can start to work as a freelancer, you need to make sure that you are entitled to live and work in Germany. Citizens from the EU, EEA and Switzerland are free to undertake freelance work in Germany without restriction.

Nationals of other countries need to have the appropriate residence permit that allows them to work in a self-employed capacity. In their Visa and residence permit applications, freelancers need to prove that they already have clients set up in Germany. This can be demonstrated with letters of intent from companies wishing to hire you or invoices for businesses you have already worked with.

Register with the tax office

To register as a freelancer in Germany, you need to fill in a “Fragenbogen zur steuerliche Erfassung” (Questionnaire for Taxation) and submit it to your local tax office. You can either download, fill out the form and submit a physical copy or complete it online via ELSTER. It’s worth mentioning that you must complete the form in German.

There are also a number of online services, like Sorted, that can handle your freelancer registration with the tax office and even take care of submitting your tax reports.

As a heads up, the information needed would be

  • Your Tax ID
  • Description of your freelance activity
  • Details of your German Bank Accounts (both personal and business, if you have one)
  • Estimated business revenue and expenses
  • Estimated profit
  • Whether you wish to charge VAT (see below)

The tax office will then determine on the basis of your answers whether you qualify as a freelancer. They will then issue you with a tax number (different from a tax ID), a unique identifier given to you as a business entity which needs to be quoted on all invoices and on your tax return. You will also receive a VAT number if you requested one.

Taxes!

Or more specifically – German business taxes.

You will also receive a payment plan from the tax office, laying out the taxes you must pay, on the basis of your turnover predictions. Depending on your estimated income, you may be required to pay income tax and VAT monthly, quarterly or yearly via an annual tax return.

Administration

Freelancers in Germany need to keep their business affairs in impeccable order. An accountant or a tax advisor can help you with this. If you are audited, the tax office can request records going back 10 years.

When submitting invoices, make sure that they are all correctly formatted and contain the following information:

  • Your full name and address
  • The full name and address of the recipient
  • Date of invoice
  • Your tax number and VAT number (if applicable)
  • Unique invoice number, assigned by you
  • Description of work undertaken or service provided
  • Net amount
  • VAT / USt (if applicable)

Health insurance

Lastly, having health insurance is mandatory in Germany. Being covered by statutory health insurance automatically qualifies you for long-term care insurance and sickness benefit.

The scheme also provides cover for your dependent family members. Freelance workers can voluntarily contribute to a statutory health insurance scheme, although bear in mind that you will usually need to cover the whole contribution (14.6% of your income) yourself.

Private health insurance in some instances may work out cheaper, as the premiums are based on your relative risk factor (i.e. your age and general health), rather than a proportion of your salary. If you opt for a private scheme, you need to make sure you are also covered for long-term care and in the event of your inability to work due to sickness.

And that’s pretty much it for this edition. For anyone who is reading who is preparing or is considering becoming a freelancer soon – I hope this helps!

Good luck!