For freelancers, entrepreneurs, small businesses and everyone else doing new work.

For freelancers, entrepreneurs, small businesses and everyone else who is interested.

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Last year, the topic of GDPR continued to become more and more important than ever for business owners, freelancers and the self-employed and of course - none more so than those in the digital space. In many ways, we are coming to understand GDPR and the European approach to privacy and data protection essentially turns every business and person into a data business or a data set. And yes, freelancers and the self-employed DO need to worry about that.

Last year on the blog, we took a birds-eye look at GDPR - beginning to unpack some key terms and points of interest. In this article, we lay out what GDPR is, and the basics that apply to you. Essentially, European General Data Protection Regulation (GDPR) has been in effect in Germany since May 25, 2018 and replaces the previous data protection law. All companies now have to adapt to the new law. All companies? Yes, sole proprietorships and freelancers are also affected. The core of the GDPR is the protection of personal data. This is all data that can be assigned to a specific person - names, addresses, telephone numbers or even IP addresses. 

So if you only process data about machines, you can sit back and relax? Caution: machine data can also be linked to personal data. For example, when workers have to log in before they can use a particular machine. And hey presto - there they are again, the personal data. So, imagine you are a solo freelance social media manager and need to use a content scheduler for a client? Yep, you need to keep an eye on GDPR. There are also special categories of personal data. These are set out in Art. 9 GDPR. This includes, for example, health data. Anyone who processes these, for example as a doctor or pharmacy, must handle them particularly carefully. 

This is actually nothing new. Even under the old data protection law, it was not possible to simply put customers together in lists and, for example, send them a newsletter. The consent of the person concerned is not required for processes that are simply part of the business, such as invoicing. But as soon as I get the idea to do something else with the addresses, telephone numbers or e-mail addresses, I need the consent of my customer.

Now, let’s get into some more acute details and approach this systemically. As intense as it can sound, it is the case of being prepared on a few specific topics that apply to freelancers and the self-employed - and you should be good to go!

The documentation requirements that the GDPR prescribes are quite annoying. But they are also extremely useful. This can be said above all about the processing directory. Here companies have to list which personal data they are processing exactly, which groups of people are affected and what they are doing to protect the data technically and organizationally. That was already there before, called the directory of procedures, but also only applied to automated processes. 

Now all forms of processing are included, pretty from anything from customer business cards or other paper files. Anyone who still thinks: there must be exceptions - that's true. In Art. 30, para. 5 of the GDPR legislation it is said that there should be an exception from the requirement for companies with fewer than 250 employees. But: There are so many restrictions on this exception that it is almost meaningless. After all, who can say with certainty, for example, that the processing of personal data that has been carried out does not pose a risk to the rights and freedoms of the data subjects, as is required there.

Very few companies manage to do their work without the help of external service providers. In certain cases, these service providers process personal data: customer data, patient data, employee data. Then there is order processing, which is specially treated by the GDPR. Because in the case of order processing, the data subjects do not have to give consent to the use of their data. 

The service provider is treated as if he were the client's extended arm. In order to guarantee a certain level of data protection, the GDPR now requires the conclusion of a contract for order processing. You can find a good sample at the GDD, here , and even as a Word document that you can adapt yourself.

Like its predecessors, the GDPR has laid down the principle of data economy. Companies need a deletion concept for the data that they no longer need. A good reason to think about a paper shredder. Incidentally, a right to deletion. You can request the person responsible to delete your personal data immediately, for example if you have withdrawn your consent. However, data that was collected on the basis of a legal basis are not affected by the right to deletion. 

Statutory retention requirements also conflict with the right to erasure. For example, invoices must be kept for ten years. But, a customer could in theory ask the same of you - so you need to ensure you have that protocol in place.

As a rule, lone fighters do not need a data protection officer. According to the law, a data protection officer must be appointed if, as a rule, at least 20 people are constantly involved in the automated processing of personal data. But: if a data protection impact assessment is required in accordance with Article 35 GDPR, a data protection officer is required for one person or more. This data protection impact assessment is required whenever special categories of data are processed. 

However, since Art. 37 Para. 1 c GDPR indicates that a data protection officer must be appointed if the "core activity of the person responsible or the processor is the extensive processing of special categories of data", most healthcare companies are (one-man - Doctors' offices or pharmacies) excluded. In Art. 91 GDPR it says in sentence 4:

“The processing of personal data should not be considered extensive if the processing concerns personal data of patients or clients and is carried out by a single doctor, other member of a health professional or a lawyer. "

The fact that sole proprietorships and freelancers are not forced to get a data protection officer does not mean that advice is not useful. You can solve many things yourself - but this is no substitute for talking to an expert. If you think the type of business or trade class your business operates under could be included in this category, please talk to a professional adviser.

Apart from sole proprietorships, freelancers and freelancers, in particular, have to adhere to the provisions of the GDPR. Freelance work is to be understood as an independently performed scientific, artistic, teaching, writing or educational activity, as well as professional activities of other groups, such as lawyers, tax consultants, architects or doctors.  

In contrast, freelancers, and freelancers called self-employed workers, performing missions and projects for companies under contract or contract for work and fair person. For the above-mentioned professional groups, both the General Data Protection Regulation and the Federal Data Protection Act contain extensive requirements that must be observed when processing personal data. The law does not provide for any exceptions or relief for sole proprietorships. EU bodies and institutions as well as the member states and their supervisory authorities required to take into account the special needs of micro-enterprises as well as small and medium-sized enterprises when applying the GDPR regulations. 

Entrepreneurs must always be able to prove that they take technical and organizational measures to ensure compliance with data protection regulations. This obligation arises from Art. 5 Para. 2 GDPR. According to this, the data processing company is responsible for complying with the data protection principles for the processing of personal data from Art. 5  Para. 1 GDPR and must provide evidence of their compliance. For this, all processes should be documented that allow conclusions to be drawn about your own GDPR compliance. 

If the person concerned or the supervisory authority makes a request, the company must be able to fully demonstrate compliance with data protection regulations. In this respect, it is advisable to document all measures that are initiated in your own company or freelance business with regard to data protection. All training measures, seminars, further education or instructions for action should be recorded. It is advisable to keep a processing directory for this purpose.  

Most freelancers and self-employed people have websites, which means you need Cookie Notices

Most of all, most freelancers and self-employed people have a website - this means you’ll need to ensure you have a complaint Cookie notice. The so-called "Cookie Directive" regulates the legal handling in the EU. To explain: EU directives are not automatically "law", but must be implemented by the E.U. countries. 

The EU Commission had declared that the cookie directive does not actually have to be implemented in Germany, as the current regulations in Germany already meet the requirements of the cookie directive. That sounds strange because the German rules do not provide for consent (i.e. click on " Yes, I agree" ), but only provide a reference to the right to object. But, you need it anyway if you want to be complaint on the E.U. level. Yep, I understand - it makes no sense, but also - is exactly how one could expect it to be!

The legally safest answer: handle cookies as per the highest standard, regardless

Site operators must obtain the consent of the users of their website. You cannot ignore this cookie notice. The consent text for a cookie notice should be displayed the first time the page is accessed (cookie warning). The text for the use of cookies should say as specifically as possible what data it is about, what it is used for and to whom this data and information may be passed on. The user must be informed in detail about the services that set cookies and transfer data. He must expressly confirm that they agree to. And very important: no data may be transferred before the user has given his / her consent.

But also - again with the nuances - you do not need the consent of the users of your website for all cookies. You do not need your consent if you cannot otherwise make your service available to the user. In other words: you do not need consent for technically necessary cookies. But, the overall advice is to play it safe. You are on the safe side if you obtain real consent for cookies and tracking tools on your website. There are so-called cookie consent or consent management tools are available for this purpose.

With a consent tool, website operators can obtain user consent to use their personal data with one click. With a consent tool, you determine which user data is saved and processed and gives users the opportunity to manage and revoke the consent they have given. There are countless providers of cookie consent tools to obtain user consent on websites. 

A refresher on our above note: session cookies, cookies for logins or shopping carts that do not pass on any data can be covered by the legitimate interests of the website operator. Third-party tracking and advertising cookies require consent. These are mainly cookies that are not absolutely necessary for the actual functions of the website and then possibly link or share the data with other data and services.

GDPR is a long and detailed topic, and on the blog we hope to cover more of it off in 2022. For now though, we hope you understand the core of your obligations the most basic protections you need in the form of Cookies Notice & Consent for your website. As with most things in the digital revolution, from taxes to shipping, you’ll need to be sure you are keeping up to date and compliant!

Do freelancers and self-employed need to worry about GDPR?

This year saw Germany elect a new government, and as to be expected, the tax changes were certainly less than the sweeping round that came into effect in 2021. That said, there was a key change to the corporate tax that is worth delving into. One of the deterrents of incorporating a business or partnership, or changing the formation, was how that it would increase the tax burden or in the very least complicate it. 

For those who have or will consider a change from freelancer to corporation, or evolve business partnerships - here is the overview of these changes. Let’s start with a more formal introduction to these changes.

With the "Law for the Modernization of Corporate Income Tax Law" (KöMoG) of June 25, 2021, an option for corporate taxation was introduced. Commercial and partnership companies are thus given the opportunity to be treated like a corporation for income tax purposes without actually changing their legal form. 

Above all, this is intended to strengthen the international competitiveness of medium-sized family businesses in the legal form of a limited partnership or a general partnership. The background to this is that partnerships are treated as independent tax subjects under trade tax law. For the purposes of income taxation, however, these are exclusively those directly or indirectly involved in it. 

In individual cases, this could lead to sometimes considerable deviations in the tax burden and bureaucratic effort compared to corporations.

Only companies that can change their legal form in accordance with the Transformation Tax Act may make use of the option. Sole proprietorships are also excluded. Partnerships (limited partnerships, general partnerships and comparable foreign companies) and partnership companies, as well as their shareholders, are given the opportunity to be treated in terms of income tax and, consequently, procedurally like a corporation or its non-personally liable partner. 

Accordingly, these associations of persons have been included in the list of corporations, associations of persons and estates. Civil law companies (GbRs) are currently not allowed to use this option.

In order to make use of the option, the partnership must submit an application to the tax office responsible for the separate and uniform determination. The application is irrevocable and must be submitted as a data record in the specified form via the Internet at the latest one month before the start of the financial year from which taxation is to take place like a corporation. A retroactive application is not possible. 

The right to choose is to be exercised uniformly by the partnership concerned, for example, the consent of all shareholders is required, subject to deviating provisions in the articles of association. There is no provision for the shareholder to choose individually for his or her share.

The transition from the taxation of partnerships to corporate income taxation is treated as a change of form. This change of legal form is by the application to exercise the option - without retroactive taxation in order for the process to be tax-neutral. It is particularly relevant that no functionally essential operating principles may be retained.

 This includes, for example, the special business assets owned by a partner under civil law. This would (initially) have to be transferred separately to the partnership. As a result of the change of form, analogous to a "real" change of form, there should be subsequent taxation of any retained amounts.

The effects of an option are basically limited to income taxes (corporation tax, income tax and trade tax) for the company and its shareholders. An opting company is taxed in the same way as a corporation, which is basically to be seen separately from the level of the shareholders. After exercising the option, the latter are treated like the non-personally liable partners of a corporation. 

Ultimately, all regulations of the Corporate Income Tax Act that refer to corporations or corporations apply. In terms of civil law, however, the company remains a partnership.

The civil law liability of the partners for the corporation and trade tax owed by the commercial or partnership company based on the option remains unaffected. If the partners are unrestrictedly liable under civil law, this also applies to the corporation tax and trade tax debts of the commercial or partnership company. If necessary, the partners can also be liable. 

Exercising the corporate income tax option can also have indirect effects on other regulations, provided that they refer to income taxation, even if they are not income taxation regulations. Therefore, regardless of whether there is an accounting obligation under commercial or company law, the profit of an opting company must always be determined by comparing the portfolio. This ensures that all opting companies, including partnership companies, are treated like corporations in this respect.

Application, and reverting to original form

There is no binding period for exercising the option. However, the application for the option back must be submitted in accordance with the rules for exercising the option of corporate taxation before the start of the financial year from which taxation is to take place again according to the transparency principle. This results in a minimum term of one year. 

As in the case of exercising the corporate tax option, there is no retroactive tax effect for the option back. The application for the option back must be submitted to the tax office that would be responsible for accepting the corporation tax return of the opting company at the time of submitting the application.

The return option is triggered without the need for an application, even if the conditions for exercising the option no longer apply. This is particularly the case if a commercial partnership is converted into a civil law partnership or if there is no longer any corporation tax liability in the country in which the opting company is managed. 

Since sole proprietorships do not exercise the option, taxation in accordance with corporate income tax principles will also be terminated without an application if the partnership is terminated under civil law due to the departure of the penultimate partner. If the penultimate shareholder leaves during the year, a separate transfer balance sheet must be drawn up for this point in time. The return option counts as a change of form, which is taxable.

The application can be submitted for the first time for financial years beginning after December 31, 2021. Companies with fiscal years in the same calendar year that want to use the option for 2022 must submit the application by November 30, 2021 at the latest.

The Federal Ministry for Finance has now outlined all of the particular the application requirements and application form, assessment options, supplementary and special balance sheet problems, the consequences for the income tax group and the return option and similar. 

They have also published the draft of a general administrative regulation on the revision of the corporation tax guidelines 2022. The new version takes into account the legal changes that have taken place in the meantime, in particular the corporate income tax law, and adjustments to current case law. 

It is worth noting that after overwhelming feedback from engagement with businesses across the country, a correct step is being taken towards neutrality of burdens for companies of different legal forms. From the point of view of many companies, however, important corrections to the draft law were unfortunately no longer made in the legislative process, such as the establishment of the option for sole proprietorships and civil law companies (GbRs) or the cancellation of the obligation to immediately post taxation of profits that were previously made within the framework. 

Hopefully this changes in the coming years. The impacts of Corona remain to be seen, and maybe it has not been growing expressly on your mind. But with these changes, it may be more possible to create a different circumstance with your business - so time to get the calculator out, and see how it looks on the balance sheets!

This year saw Germany elect a new government, and as to be expected, the tax changes were certainly less than the sweeping round that came into effect in 2021. That said, there was a key change to the corporate tax that is worth delving into. One of the deterrents of incorporating a business or partnership, or changing the formation of one, was how that it would increase the tax burden or in the very least complicate it. For those who have or will consider a change from freelancer to corporation, or more specifically evolving business partnerships - here is the overview of these changes.

Explained for freelancers and the self-employed: the new corporate tax changes in depth

Every new year is a new financial calendar year in Germany, which many expats may note is different to their home countries. As with every year, we at Kontist want to make sure freelancers and the self-employed are totally prepared for year, deadlines and their tax responsibilities by giving you a full overview of the German tax calender for 2022. 

This blog post will summarise and highlight everything freelancers and the self-employed need to have in mind, starting off 2022!

On the 20 December, 2021 the German Ministry for Finances published a complete guide to the upcoming changes that would come into effect on 01 January 2022. Let’s get started with a quick review of their official announcement, obviously focused on the self-employed or those with a mix of employed and freelancer activity.

The so-called subsistence level must be tax-free for everyone. For this, there is the basic tax allowance for income tax. The federal government is taking into account the increased cost of living in Germany. The maximum amount for the deduction of maintenance payments will also be increased accordingly from January 1, 2022.

Salary increases/ income increases will not be impacted by taxes rises in certain cases

A salary increase, i.e. a wage increase, should also make itself felt in the purse of employees. Therefore, the income tax rate for the year 2022 will be adjusted to offset the effect of the so-called "cold progression". That means: wages and salaries are not taxed higher, provided that their increase only compensates for inflation.

In order to take into account the often more difficult conditions in the pandemic, the federal government has given employers a special allowance for their employees: Bonus payments (grants and support) of up to 1,500 EUR have been available since March 1st be paid out tax-free in 2020. This rule applies until March 31, 2022.

Companies and self-employed persons can take advantage of extensive support with the extension of corona aid until the end of March 2022 if they suffer from corona-related restrictions:

Bridging aid IV for companies and self-employed people: up to 90 percent reimbursement of fixed costs

Improved equity subsidy for companies that are particularly hard hit by corona-related closings

Restart aid for self-employed people: continue to receive up to 1,500 euros per month in direct grants.

In addition, significant special regulations for short-time work allowance apply until March 31, 2022. In addition, the application deadline for the KfW special program has been extended to April 30, 2022 and the applicable credit limits have been increased again. This means that the program is available to companies of all sizes and from all sectors to cover their liquidity needs. For more information on Corona help, please look to the Kontist blog.

If smaller companies are planning to purchase machines or similar within the next three years , they can use the so-called investment deduction amount to deduct part of the costs when calculating profits. Due to the corona crisis, however, many companies were unable to invest as planned, which is why they were threatened with retroactive processing of the investment deduction amount after the three-year period had expired. 

An extension to the end of 2021 has therefore already been agreed for preferential investments with a deadline until the end of 2020. This deadline will now be extended by another year to the end of 2022. In this way, companies can catch up on their investments without negative tax consequences.

For the self-employed who may own property, or were thinking of purchase in 2022

On January 1, 2025, the new real estate tax will come into force as an unbureaucratic, fair and constitutional regulation. This means that the unit values ​​as the previous basis for calculating property tax will also lose their validity. The property tax value then takes its place in all federal states that have not made any deviating regulations. 

It is determined by the responsible tax office on the basis of a few pieces of information that property owners communicate to their tax office. The reference date for the status of this information is January 1, 2022. However, owners do not have to do anything on this date. We will likely be informed by a public announcement at the end of March 2022.

Pension expenses from the basic pension can be deducted from tax as special expenses up to a certain maximum amount. The basic pension includes, among other things, the contributions to the statutory pension insurance, for professional pension institutions and the so-called Rürup pension. In the coming year, these expenses can be better deducted, according to the taxpayers' association. Accordingly, a slightly lower maximum amount of 25,639 EUR.

The deadline for filing the 2020 tax return has been extended

If taxpayers have their declaration for the year 2020 prepared by a tax advisor or income tax aid association, the submission deadline will be extended to May 31, 2022. Actually, the previous date for everyone with a tax advisor was the end of February 2022. Due to the corona pandemic, capacities in many tax offices are currently very scarce, so the tax office grants three months more time.

VAT (‘’Sales Tax’’) Deadlines for 2022

Of course, VAT is the ongoing responsibility of reporting your sales taxes and going through the balancing process with the Finanzamt. Not much should be changing here, and the Golden Rule remains: do not miss these deadlines!

The trade tax is also an important tax for you as an entrepreneur in Germany. This is usually levied as trade income tax by the city or municipality in which you are based with your company. The trade tax is always 3.5 percent of your trade income, but is multiplied by the tax rate of the city or municipality. This rate of assessment can, however, differ from municipality to municipality. 

But there is also another special feature. As a sole proprietorship or as people associate you an annual allowance benefit, which is 24,500 EUR. However, you always have to submit the trade tax return as part of your tax return. This can also be done automatically via ELSTER. What you need to know about collecting trade tax and what the tax rate is regulated in the trade tax law. You always have to pay trade tax as a quarterly advance payment. It is always due in the middle of a quarter.

Tax calendar for the trade tax prepayment 2022

The following dates should definitely be part of your tax calendar for 2022.

1st quarter 2022	Tuesday, February 15, 2022

4th quarter 2022	Tuesday, November 15, 2022

Dates of the income tax prepayment & corporation tax prepayment 2022

As dates for the advance payments of income tax or corporation tax, you have to note the following tax dates 2022:

1st quarter 2022	Thursday, March 10, 2022

3rd quarter 2022	Monday, September 12, 2022

4th quarter 2022	Monday, December 12, 2022

For the tax return there for you very clear deadlines which you must comply with. These submission deadlines concern the declarations on income tax, corporation tax, trade tax and sales tax. This submission deadline is May 31, 2022. This submission deadline is the same every year. However, you can also request an extension of the deadline.

Extension of the deadline for the tax return

These submission deadlines are automatically extended if your tax advisor carries the tax returns out for you. It can also be, for example, a tax aid association or comparable institutions. In these cases, the submission deadline is extended to December 31, 2022. If you can provide understandable reasons that you cannot meet the deadline for your tax return, you can also extend the deadline for yourself. In this case of an individual application, the tax office can extend the deadline to February 28, 2023. This extension of the deadline is really the last possible submission date.

And, WOW! That is the tax year for 2022 for freelancers and the self-employed. We hope you feel across the calendar, and also feel that even with Corona and the pandemic looming over us, you have been able to make the planning phases of the year work for you and your business!

Every new year is a new financial calendar year in Germany, which many expats may note is different to their home countries. As with every year, we at Kontist want to make sure freelancers and the self-employed are totally prepared for year, deadlines and their tax responsibilities by giving you a full overview of the German tax calendar for 2022. This blog post will summarise and highlight everything freelancers and the self-employed need to have in mind, starting off 2022!

New Year, New Tax Calendar: everything freelancers and the self employed need to know for 2022.

New Year, New Tax Calendar: everything freelancers and the self employed need to know for 2022

Every year, governments and tax agencies make changes to their tax codes and regulations. Germany is no different and self-employed and freelancers should always be across the changes, because even in the case where the changes do not directly affect you - it may hold indirect impacts, or, potentially influence future decisions about your business. We have reviewed the forthcoming changes coming to taxation in Germany in 2022, and discuss them in this blog. 

Due to the federal election in 2021, only a few relevant legislative changes need to be implemented by the end of the year. The old Bundestag has ceased its activities, the new Bundestag has only just been constituted. The legal changes are therefore still largely influenced by the digital VAT package of the European Union that came into force on July 1, 2021, which we spoke about on the blog. But, it is really important especially with so many digitally engaged freelancers and self-employed people who may be impacted - so here is a quick refresher:



Regulations put into effect for the digital package

One-stop shop regulations: The regulations for the 3 different one-stop shops formally came into force on April 1st, 2021. From this point in time, the entrepreneurs concerned could register for the tax return of the reportable sales from the 3rd quarter of 2021. The first reportable sales had to be registered by the end of October 2021.

Distance sales : For all sales executed since 07.01.2021 the rules on distance selling are subject to the requirements of the new version. In particular, the new regulations for intra-community distance sales must be taken into account. Since the national delivery thresholds were no longer applicable for deliveries to customers who do not have to tax intra-Community acquisitions in the country of destination, the place of delivery for the supplying entrepreneur is shifting to the Member State of destination, with the exception of the EU-wide total turnover threshold of 10,000 EUR. Individual taxation in the Member State of destination can only be avoided if registration for the one-stop-shop scheme has been made in good time. Registration as a process is described on our blog here.

Extension of the reduction in the tax rate for catering sales & advance payments



Since July 1st, 2020, due to the (first) Corona Tax Aid Act for restaurant and catering services, the reduced tax rate has been in effect from July 1st, 2020 to June 30th, 2021. However, the delivery of beverages is expressly excluded from this; the standard tax rate continues to apply here.

Due to the effects of the corona pandemic extending beyond June 30, 2021, the 3rd Corona Tax Aid Act extended the application of the reduced tax rate to December 31, 2022. The tax authorities have already implemented their 2020 for flat-rate offers simplifying regulations with regard to the limited application the reduced tax rate for the restaurant and catering services extended. In the case of combination offers that include both food and drinks at a flat rate (e.g. buffet, all-inclusive offers), no complaints will be made if the remuneration for the drinks is set at 30% of the flat rate. 

This carries on generally with simplified reduction of current advance payments. Taxpayers who can be shown to have had a direct and not insignificant negative economic impact can submit applications for adjustment of the advance payments to income tax and corporation tax 2021, stating their circumstances, by December 31, 2021. The application is submitted to your responsible tax office via the tax administration's website or online at ELSTER. When it comes to the reduction of business tax prepayments, these can be adapted by your respective municipality.

For the 2021 assessment period, the tax authorities had already presented the return forms for the 2021 annual tax return in December 2020. The content of the annual tax return 2021 has been adapted to the sales that have to be declared since July 1, 2021 due to the VAT digital package and the expansion of the reverse charge procedure for telecommunications services implemented on January 1, 2021.

In spite of the lower sales tax rates in the second half of 2020 , which will also affect the annual tax return for 2021 (e.g. for taxation based on income received or in the case of changes in the assessment basis for sales made in 2020 with taxation according to agreed payments), it does not yet appear there are any explanatory fields for sales at 5% or 16% sales tax.

With the - rather dramatic English translation - “Law for the Modernization of Corporate Income Tax Law” (KöMoG) which was released June 25, 2021, an option for corporate taxation was introduced. Commercial and partnership companies are thus given the opportunity to be treated like a corporation for income tax purposes without actually changing their legal form. 

Above all, this is intended to strengthen the international competitiveness of medium-sized family businesses in the legal form of a limited partnership or a general partnership. The background to this is that partnerships are treated as independent tax subjects under trade tax law. For the purposes of income taxation, however, these are exclusively those directly or indirectly involved in it. In individual cases, this could lead to sometimes considerable deviations in the tax burden and bureaucratic effort compared to corporations, according to the explanatory memorandum. 

This topic will have very strong implications for freelancers and the self-employed whose circumstances could or may apply. It will be the topic of a more in depth blog article.

10% limit for allocation to company assets 


Objects that an entrepreneur uses for both his business and his private purposes can only be assigned to the company if at least 10% of the object is to be used for business purposes. This regulation, which is included in the German tax code for an unlimited period, is dependent on an authorization under European Union law. The last authorization granted to the Federal Republic of Germany is limited to December 31, 2021. If no connection permit is published by December 31, 2021, entrepreneurs who acquire objects from January 1, 2022 and who will not use at least 10% of them for business purposes can invoke Union law and use these objects in contravention of Section 15 (1) sentence 2 UStG assign to the company.

Since January 1, 2019, uniform EU regulations on the so-called single-purpose and multi-purpose vouchers have been in effect. The financial administration took a comprehensive position on the new regulations for the first time in November 2020. This resulted in application principles that are not apparent from the law. The tax authorities do not object if these regulations are not yet applied to all vouchers issued before February 2, 2021.

Since 1.7.2021, in addition to the new regulations governing the place of supply and the tax consequences of the VAT Digital package of the EU are also the recording rules and liability rules for providers of electronic interfaces have been newly regulated. In particular, the operators of electronic interfaces no longer have to complete the national registration of the entrepreneurs acting through them with the VAT 1 TI certificate, but with the German VAT ID number. to lead. However, the tax authorities had granted a non-objection period until August 15, 2021.

Cross-border goods transports are tax-free. However, this can only apply if the carrier performs its service directly to the sender or recipient of the consignment of goods. So-called "subcontractors" can not carry out any tax-free transport services. The tax authorities had implemented this in principle and extended a transition period originally granted until June 30, 2020 several times to December 31, 2021.

The tax authorities have issued a supplementary position on the delimitation of the content of the involvement of subcontractors and, in particular, specified simplification regulations for the so-called mixed broadcasts. The non-objection regulation granted until December 31, 2021 has not been changed as a result.

Extended deadlines for the investment deduction amount

The legislature changed the investment deduction amounts in the Annual Tax Act 2020. They are among the most important tax breaks for small and medium-sized businesses - with the aim of increasing their willingness to invest.

For investment deductions that companies made use of in fiscal years ending after December 31, 2016 and before January 1, 2018, the investment period has already been extended to four years, i.e. companies would also have to make investments by the end of the fiscal year ending 2021 or dissolve the investment deductions increasing the profit. As a result of the KöMoG, the investment period has now been extended to five years, so that an investment that is only made in the financial year that ends before January 1, 2023 still remains on time. 

The corresponding deadlines for investment allowances have also been set if the companies made use of this in financial years ending after December 31, 2017 and before January 1, 2019 , extended to four years so that such investments are still possible in the financial years ending before January 1, 2023.

The reinvestment period was extended by two years through the KöMOG . This allows companies to post profits from the sale of certain assets tax-free as reserves. If the reinvestment reserve is still available at the end of the financial year ending after February 28, 2020 and before January 1, 2021 and should be dissolved, the reinvestment period and thus the obligation to dissolve the reserve will be postponed to the end of the second subsequent financial year. Great for those of you who have been navigating Corona by making changes and adjustments.

That concludes our overview of the 2022 changes for the taxation and financial year, that freelancers and the self-employed should be aware of. We are going to delve into some of the more impactful changes over the coming months to ensure you are fully aware of how these changes will impact you.

Every year, governments and tax agencies make changes to their tax codes and regulations. Germany is no different and self-employed and freelancers should always be across the changes, because even in the case where the changes do not directly affect you - it may hold indirect impacts, or, potentially influence future decisions about your business. We have reviewed the forthcoming changes coming to taxation in Germany in 2022, and discuss them in this blog.

Corporate Tax Is Changing in 2022: what should the self-employed should know?

The three biggest fears of most Ausländers, and frankly most Germans, are pretty easy to identify: Finanzamt, Ausländerbehörde and SCHUFA. For freelancers and the self-employed from abroad they are likely to have concerns about all three that intersect at different points in their lives and careers. Today, we are going to talk about SCHUFA, but some myths and hopefully explained an overly complex and sometimes unfair system of rating your worthiness - because yes, for freelancers and the self employed, it matters a lot! Almost no one, whether a private person or entrepreneur, can escape the ubiquity of SCHUFA and other credit agencies. In the case of running a business in particular, the rating of the credit bureaus may decide on success or failure, so founders, in particular, should familiarize themselves with the matter.

Now, we need to make a quick differentiation. We will talk first of all about freelancers, then a little more about the self-employed which would include people involved in partnerships, GmbH or similar business operations - because there are some key differences. Firstly, it should be noted there are some classic differences in how SCHUFA sees a natural person and a natural person who is also a freelancer or self-employed person. In Germany, your creditworthiness is recorded and stored by SCHUFA Holding AG, Germany's largest credit agency - by everyone who is registered in Germany. 

The abbreviation SCHUFA stands for "Protection Association for General Loan Assurance". And whenever someone speaks of SCHUFA points, SCHUFA reports or SCHUFA ratings, he or she means the same thing: your creditworthiness. This is a measure of how reliably you are committed to making utility bills and credit card payments, and how high the likelihood that you will continue to dutifully perform.

When you also have a self employment situation, as a natural person, SCHUFA would look at you as an entrepreneur, whereby a search is carried out with the first and last name of the small business owner or freelancer in the SCHUFA personal database. The information contained in the information is supplemented with the B2B score for entrepreneurs. The information provided in the report is as follows:

Personal details (personal master data: surname, first name, current address, gender, date of birth, place of birth, identification number [SCHUFA-Perskey])

Information about the establishment of a business relationship and the contractual processing ("positive data")

Data on the non-contractual processing of transactions ("negative data")

Data from public directories and official notices ("public negative data")

Bear in mind, the average data SCHUFA saves on people:

any other addresses, including earlier addresses

They are then provided information from their partner companies about:

The aim of the credit agency is to create a score for each person asked. SCHUFA tries to predict how high the probability is that a customer will meet their payment obligations - which is crucial for the seller or provider, for example in the case of installment payments, loans and purchases on target. The score is calculated using mathematical-statistical methods and is based on the stored information. Some credit agencies do not give a score, but make a recommendation in the form of a traffic light system.

The algorithm on which the score is based is of course secret. The fact is, however, that in addition to the credit history (including personal loans or mortgage lending), past consumer behavior is also included in the score. An example: the more credit cards or mobile phone contracts are used, the more detrimental it is for the personal rating, because excessive consumption is often the cause of personal bankruptcies. In general, the main causes of private over-indebtedness are unemployment, low wages and consumer behavior that does not match income. But you can also quickly get into financial difficulties through a failed self-employment or separation and divorce. 

Capitalism never leaves you wanting for ways to end up broke and penniless! There are more personal bankruptcies in large cities and metropolitan areas than in rural areas. Many other attributes are secret, so for a long time, it was assumed that the place of residence and the associated demographics in this area also influence the score. However, this has been denied several times. Here is some of the information SCHUFA does not, and cannot have, despite a Facebook post that might tell you differently:

Marketing data (buying behavior or the like)

Attitudes towards life and memberships (e.g. religious, political, etc.)

Many companies have in their general terms and conditions that the customer must agree to a review by the credit bureaus. As a rule, the customer agrees without having read the terms and conditions carefully when ordering books, entertainment electronics or clothing via the Internet. In some cases, only the address provided is checked and the creditworthiness is not automatically determined. This "small" query is intended to reduce unnecessary returns in shipping to a minimum and prevent cases of fraud.

Many companies report their payment history, especially in the case of negative incidents, back to the respective credit agency. The customer can assume that they will no longer be able to order products or services on account for some time if his payment behavior was not optimal in the interests of the respective company.

When collecting inquiries, the Federal Data Protection Act assumes a “legitimate interest”. This basically exists when a trader takes a business risk within a business relationship. This is the case when traders find out about other companies or private individuals with whom a business relationship is to be initiated or already exists. The situation is different with private individuals who want to obtain information about other private individuals, here only landlords (not commercial) are allowed to check potential tenants with the services of a credit reporting agency. 

The "queried" is not informed of the query. Before a bank grants a loan, it must check how high the equity cover is, as there are guidelines on how much the loan applicant must bring. There are two ways of doing this, one of which is internally based on the bank's experience with the customer, and the other invoicing. Depending on how the default risk is assessed, the interest rate increases or decreases accordingly. 

Completely independent of possible start-up projects, every citizen should therefore have an original interest in the best possible score; in addition to credit decisions, other projects such as new credit cards, mobile phone contracts or leasing are significantly simplified.

For founders, even more depends on a good score. Even when founding a corporation, the founder is in many cases, at least initially as a private person, liable for any external financing. One of the greatest challenges for founders is to find a bank to finance their own project. If the credit decision-makers at the bank are convinced of the project, a self-assessment of the shareholders must be drawn up and the assets contained therein must be documented accordingly. 

Even if there is a guarantee, for example from a guarantee bank, the personal creditworthiness is checked. In the case of leasing or other financing projects, the shareholders or the newly founded company also carry out a credit check.

A further complicating factor is that the data from the credit reporting agencies are not always up-to-date. In the “Consumer Information Scoring” of the Federal Ministry of Food, Agriculture and Consumer Protection from 2009, reference is made to a study in which only 12% of the respondents in a representative population survey in 2007 knew the term “scoring”. 

On behalf of the Federal Ministry, a research group of 100 test persons from all over Germany requested a self-assessment from three credit agencies: SCHUFA, Creditreform and Arvato. In the study, 45% of the information provided by SCHUFA had incorrect, incomplete or incorrect entries. 


When assessing the creditworthiness of a company, balance sheet ratios play a major role. In addition to the annual financial statements, the equity ratio, the available cash reserves as well as the free and operative cash flow and of course the profit or loss development are of interest to the auditor. The quality of management as well as investment projects or the current asset and debt situation also play an important role.

In practice, the creditworthiness of a company is measured in scores or ratings. This rating can fluctuate between “very good creditworthiness” and “justifiable creditworthiness” and is usually determined by rating agencies. Creditworthiness is given if the company or the debtor receives a rating that is within the scope of "investment grade".

Of course, it is advisable to carefully check the business conditions for companies with poor credit ratings. Overall, the aim of the credit rating is to determine the debtor's credit risk by means of a rating. For the company concerned, a deterioration in creditworthiness often results in higher refinancing costs, since the loan interest includes a creditworthiness-dependent risk premium. If a company has a good credit rating, the loan rate is usually lower than if it has a bad credit rating. Conversely, companies with poor credit ratings pay higher interest rates.

OK, what if you messed up? How long will it take to clear the debt?

​​Ironically, the entries on repayment difficulties for loans or insolvency - i.e. those that cause the greatest difficulties with a new loan application - stay in your SCHUFA information the longest. Once you have paid the claim, it will take three years for the entry to be deleted. And the counting of these three years does not start until the end of the year in which you paid off the debt. For example, if you pay an overdue amount in the spring of 2019, the waiting period for deletion does not begin until the turn of the year 2019/20. Three years later, on January 1, 2023, you will then be rid of the entry.

After all: If the creditors report the payment to the SCHUFA, the entry remains. But he already gets a “completion note”. This means that the SCHUFA still remembers that you were once in arrears with a payment. But she also registers that the case is now ticked. Accordingly, your SCHUFA score should rise a little again. Kind of seems unfair if you pay the debt entirely, but O.K.!

Hopefully, you are able to better understand how this impacts your life in this context. It is very different from the way credit works in other countries - the subtle nuances and similar. It is also a myth that having a company or corporation gets you out of having no access to loans and financing - there will always be some elements of private discovery. There’s already a lot to think about when starting a business, outside of actually doing it so best to be informed!  As a freelancer and self-employed person, maybe you do not need access to credit, but no matter your situation it’s important to know how the system works!

The three biggest fears of most Ausländers, and frankly most Germans, are pretty easy to identify: Finanzamt, Ausländerbehörde and SCHUFA. For freelancers and the self-employed from abroad they are likely to have concerns about all three that intersect at different points in their lives and careers. Today, we are going to talk about SCHUFA, but some myths and hopefully explained an overly complex and sometimes unfair system of rating your worthiness - because yes, for freelancers and the self employed, it matters a lot!

SCHUFA and Business Credit Checks: how does it work?

You have probably heard of GDPR, you probably read the Cookies Notice on nearly every site you visit and you’re probably aware it is a really, really big deal. For most freelancers and self employed people running a solo operation with few assets or digital real estate, it may seem like something they do not have to worry about. However, GDPR is something that all people need to be aware of and take responsibility for. So, let’s take a look at what that looks for for freelancers and the self-employed! Firstly, the E.U. tends to have complicated laws but they are also very comprehensive and protective of the citizen - as the new OSS rules show. No one ever said creating the union would be easy…

So let’s start with what GDPR is exactly. The European Union's General Data Protection Regulation (GDPR) aimed to improve E.U. citizens' control over the data companies hold about them. While the goal is simple, achieving ‘’compliance’’ isn't that easy for most organizations. This includes a comprehensive review of who has access to which data and where the regulated data is located, as well as the ability to carry out necessary security audits and continuous controls. Which, if you are a giant multinational corporation you can just throw money at the problem. 

If you’re a one person show freelancing or self-employed - well guess what, you have to become Privacy Expert. It goes further than this: while the regulation only applies to E.U. citizen data, all companies worldwide that operate in the E.U. or have websites that can be found in the E.U. must comply with these rules. It really has a global impact. This new regulation requires significant changes in the way and where companies store customer data, and most importantly, how they give employees, contractors and business partners access to this data.
 
The E.U. GDPR (General Data Protection Regulation) attracts so much coverage because of the increased administrative fines for non-compliance. However, not all infringements of the GDPR will lead to serious fines. Besides the power to impose fines, E.U. countries have a range of corrective powers and sanctions to enforce the GDPR. These include:

Imposing a temporary or permanent ban on data processing;’

Ordering the rectification, restriction or erasure of data; and

Suspending data transfers to third countries

Even under the old data protection law, it was not possible to simply put customers together in lists and, for example, send them a newsletter. The consent of the person concerned is not required for processes that are simply part of the business, such as invoicing. But as soon as I get the idea to do something else with the addresses, telephone numbers or e-mail addresses, I need the consent of my customer - preferably in writing, because in case of doubt I have to prove the consent, Art. 7 Para. 1 GDPR  and this is where it becomes relevant for the ‘’small timers’’ of freelancing and self employment. Ultimately, however, there are some really good reasons for GDPR compliance, for us in business and as people: 

The protection of the privacy of every individual is essential in the age of the information society.

In modern business life, data protection means a quality and competitive factor.

Data protection and data security are pioneers for e-commerce.

In the course of globalization, data protection is also becoming increasingly important internationally.

Data protection means fundamentally guaranteed personal protection.

Assuming most freelancers and self-employed people reading this are not running giant corporations, there are likely some exceptions to the extent of your GDPR compliance. Below we will run through the important questions you need to ask your self about GDPR compliance.

Data protection checklist for freelancers and the self-employed

1. Do I process personal data (e.g. names, addresses, telephone numbers, IP addresses, email addresses, etc.)?

2. How do I process this data (online via the cloud, on my computer / Excel, Word, card index etc.)

3. Do I have a procedure directory? 
Here, you have to list which personal data you are processing, which groups of people are affected and what they are doing to protect the data technically and organizationally. That was already there before, called the directory of procedures, but also only applied to automated processes.

4. What is the legal basis for using the personal data?

Fulfillment of a contract (e.g. invoicing)

legitimate interests of the person responsible, provided that the interests of the data subject do not outweigh the interests of the person concerned

5. Is there a legal basis for collecting and processing all data?

if necessary in writing (due to the obligation to provide evidence), but can also be done electronically or orally

Information about the possibility of revoking consent at any time

For data from under 16-year-olds: approval of the legal representative

6.. Have I fulfilled my information obligations by means of a data protection declaration (print or online)?

7. Do I observe the requirements of a data protection declaration?

Information about the type of data and how it is processed

Reference to the rights of the person concerned (especially: revocation, information, deletion, correction)


Appropriate technical and organizational measures

According to Art. 32 Para. 1 GDPR, companies must take suitable technical and organizational measures to protect data and prevent risks for those affected. To do this, you first have to be clear about the risks you are dealing with. And it is best to document these thoughts (the documentation obligations come from Art. 5 Para. 2 GDPR.

If I employ at least 10 people who are constantly involved in the automatic processing of data

Possibly from one person: When I have to do with special categories of data (e.g. health data) - this is currently controversial

Let’s expand on this a bit. As a rule, lone fighters do not need a data protection officer. According to  Section 38 of the new Federal Data Protection Act in Germany, a data protection officer must be appointed if, as a rule, at least 20 people are constantly involved in the automated processing of personal data. But: if a data protection impact assessment is required in accordance with Article 35 GDPR, a data protection officer is required for one person or more. This data protection impact assessment is always mandatory when special categories of data are processed, such as health data (see above). This would then apply, for example, to small medical practices or pharmacies.

However, since Art. 37 Para. 1 c GDPR indicates that a data protection officer must be appointed if the "core activity of the person responsible or the processor is the extensive processing of special categories of data", most healthcare companies are (one-man - Doctors' offices or pharmacies) excluded. Hence, why special categories are noted above.

10. Do I use external service providers to process the data (e.g. cloud services, external accounting, providers, social media connections etc.)?

11. Do I have an order processing contract with these processors? 

Very few companies manage to do their work without the help of external service providers. In certain cases, these service providers process personal data: customer data, patient data, employee data. Then there is order processing, which is specially treated by the GDPR. Because in the case of order processing, the data subjects do not have to give consent to the use of their data. The service provider is treated as if he were the client's extended arm. In order to guarantee a certain level of data protection, the GDPR now requires the conclusion of a contract for order processing.

You have probably heard of GDPR, you probably read the Cookies Notice on nearly every site you visit and you’re probably aware it is a really, really big deal. For most freelancers and self employed people running a solo operation with few assets or digital real estate, it may seem like something they do not have to worry about. However, GDPR is something that all people need to be aware of and take responsibility for. So, let’s take a look at what that looks for for freelancers and the self-employed!

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Do freelancers and self-employed need to worry about GDPR?

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