How to become a freelancer or self-employed in Germany | Visas | Taxes

This article provides some essential tips and tricks for US citizens starting their freelancing career in Germany.

In this article, we’ll also discuss the Wise Business account as a way for you to hold money, send and receive payments across currencies, and even save your money.

Can I legally freelance in Germany if I’m not a citizen?

Yes, the German government encourages freelance work and while bureaucracy and paperwork can give you a headache in any country, they've structured their regulatory system to make it relatively easy to get on your feet. With the proper visa, you’re legally allowed to do freelance work while you live in Germany.

Germany - Digital Nomad Visa

The German system doesn't not currently provide digital nomad visas. Instead, freelancers and self-employed individuals will need to apply for a visa specifically to work as a freelancer in Germany.

Difference between Self-employed vs. Freelance businesses

In Germany, certain professions are considered trade versus freelance professions. This means that you cannot simply choose whether you are a self-employed person or a freelancer.

Put simply: all freelancers are self-employed, but not all self-employed people are freelancers. There are even different legal classifications in Germany between being a freelancer (Freiberufler) or a self-employed business owner (Selbstständiger).

Why does this matter? If you’re self-employed, you have to register your business or trade with your local government, and may need to acquire health or regulatory permits. Freelancers and self-employed persons also have different tax obligations. ¹

Self-employed Tradespeople 1	Freelancers1
Register with the trade office Required to be member of their local trade organization Pays the trade tax Doesn’t register as self-employed at the tax office Typical trade professions: commercial and industrial enterprises, as well as operating as an intermediary or having a restaurant business	Doesn’t pay the trade tax Doesn’t register to the official business register Typical freelance professions: tax consultants, doctors, lawyers, engineers

How to begin freelancing after coming to Germany

1. Register your place of residence ²
2. Get a German bank account
3. Get health insurance ³
4. Apply for a residence permit for freelancing or self-employment ³

The Wise International Business Account

With a Wise account, German businesses can hold and send payments without the hidden fees. They also can receive payments in many global currencies (EUR, GBP, USD, CAD, JPY, AUD, and more) free after making a one-time payment. This means that you can get paid directly to your account, then take advantage of Wise's low-cost transfers to save money.

Notable Features:
No account opening fee
No minimum balance requirement or monthly fees
Receiving funds in global currencies costs a one-time fee of 31 USD
Fees are charged per transfer with US fees starting as low as 0.42%
The Wise account offers the mid-market rate—the same exchange rates that banks use when trading currencies—resulting in reduced costs for businesses as they don't suffer from inflated exchange rates
Accounting Software Integrations
Batch Payments: Pay up to 1000 invoices in one instance

Send money with Wise >>

Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.

Who needs a visa to freelance or start a business in Germany?

Citizens from the EU, as well as Liechtenstein, Norway, and Switzerland can freely start a business in Germany without a visa or residence permit.

If you are not from one of the above countries, you will need to apply for a residence permit to carry out self-employment. This obligation exists also for foreigners currently living in Germany.⁴

If you have not arrived in Germany yet and plan to be self-employed, you should apply for a residence permit to carry out self-employment prior to your arrival in Germany. You will need to apply for this visa to a German diplomatic mission. Upon acceptance, you will receive a 3-month visa, which can then be converted into a long-term residence permit once you’re in Germany. ⁴

Freelance Visa Documents ⁵

• Completed application form
• Proof of health insurance
• Business plan (A finance plan and revenue forecast)
• Researchers and Scientists: Previous employment contract
• Graduates of German universities: Proof of university degree
• Over 45 years of age: Proof of sufficient retirement income

Other helpful documents:

• Two to three recommendation letters
• CV and Resume

What are the fees and costs of a freelancer visa?

Residence Permit Fees: For each appointment you have with the Ausländerbehörde, you have to pay a fee for the residence permit, which can run from €100-147. ⁵

Visa Fees: The cost of getting a visa is around €80. ⁵

To get a better idea of just how much you will pay, visit your local embassy, consulate, or immigration office. Prepare for multiple appointments.

What is the duration of a residence permit?

The duration of a residence permit is initially 3 years and can be extended. After 5 years, the freelancer can apply for a settlement permit. ⁵

Want to see how much you will pay on your Wise Business transfers? Take a look here:

What about taxes for freelancers and self-employed individuals in Germany?

Freelancers and self-employed individuals are responsible for paying taxes to the German government.

Registering for Taxes

Tax registration varies depending on freelancers or self-employed individuals.

Freelancer (Liberal Professions)

You must register your activities with the German tax office. After registering, the tax office will give you a tax number, which will then help you report your business activities and pay taxes. ⁶

Self-employed Individual

The self-employed person can register their employment activities at the trade office. If you are considered as a trade professional, you should consult the Chamber of Industry and Commerce or the Chamber of Skilled Crafts to ensure that you have all the necessary paperwork. ⁶

Let’s outline a few different types of taxes they might have to pay.

Income Tax

The tax burden varies depending on the freelancer’s or self-employed individual's income.

Taxable profit7	Income tax rate
Under 11,604 Eur (basic allowance)	0%
11,605 to 17,005 Eur	14%
17,006 to 66,760 Eur	15 to 41% (Differs by individual)
66,761 to 277,825 Eur	42%
277,826 Eur	45%

VAT

Value-added Tax (VAT) is added onto goods and services in Germany and across Europe. This rate is 19% and can be reduced on certain items to 7%. ⁷

Input Tax

The input tax is similar to VAT. But, it is paid on outgoing payments. For example, if a self-employed person pays for office supplies, they will pay the input tax. In other words, freelancers pay this tax on expenses. ⁷

Advance tax payment

Soon after the freelancer registers their business, the tax office sends a questionnaire where the freelancer must state their projected income. Thereafter, the freelancer will receive taxes based on this projected income. ⁷

After filling out the questionnaire, the freelancer will then make advanced tax payments throughout the year. By doing this, the freelancer avoids excessive taxes at the end of the year.

While the advanced tax payments take note of your project income, refunds will be provided for excessive payments after you give your annual tax return.

These income taxes are paid quarterly. ⁷ Here are the dates:

• March 10th
• June 10th
• September 10
• 10th of December

Advance sales tax return

Similar to the advance tax payment, the advance sales tax return is done to avoid large tax payments annually. The sales tax return is paid each month on the 10th. The frequency of payment depends on the amount owed by the freelancer or self-employed person. The freelancer can also expect to pay or be refunded an additional amount after providing their annual tax return.

Amount of tax liability in the previous calendar year 8	Pre-registration period
Below 1,000 Eur	Annually
1,001 - 7,500 Eur	Quarterly
Over 7,500 Eur	Monthly

Trade Tax and Corporate Tax

The freelancer doesn’t pay two types of taxes: 1. The trade tax 2. ⁷ The corporate tax. It’s important to note that the professionals involved in trade will pay these taxes.

Trade Tax for Self-Employed

The trade tax is a combination of two types of taxes. The uniform tax rate of 3.5% and the municipal tax rate (varies by location). ⁹

Corporate Tax for Self-Employed

The corporate tax rate is 15%. It is then subjected to an additional surcharge of 5.5%, which adds up to 15.825%. ⁹

Bottom Line:

It is highly recommended that you handle this new landscape with the help of a certified tax professional. While this will cost you extra funds in the beginning, it may save you from making mistakes that will take away from your main business activities.

The German system allows you to freelance and be self-employed. However, these distinctions aren't something you can choose. Instead, it is something that is laid out by the German government. To learn more visit the sources listed below and also speak to US or German diplomatic representative to see if there have been any recent changes.

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Sources:

1. https://www.accountable.de/en/blog/register-freelancer-or-tradesperson/
2. https://www.bmi.bund.de/EN/topics/administrative-reform/registration/registration-node.html
3. https://gruenderplattform.de/geschaeftsideen/freiberuflerin-werden
4. https://www.make-it-in-germany.com/de/arbeiten-in-deutschland/existenzgruendung/visum/allgemein
5. https://www.make-it-in-germany.com/de/arbeiten-in-deutschland/existenzgruendung/visum/freie-berufe
6. https://abill.io/en/blog/freelancer-legal-setups-and-taxation-in-germany/
7. https://wb-web.de/dossiers/recht-weiterbildung/folge-2-gesetzliche-rahmenbedingungen-zum-arbeitsverhaltnis-des-lehrenden/steuern-fur-freiberufler-selbststandige.html
8. https://verwaltung.bund.de/leistungsverzeichnis/EN/leistung/99102021241000/herausgeber/BE-L100108_326205/region/110000000000
9. https://taxsummaries.pwc.com/germany/corporate/taxes-on-corporate-income