Figuring out your taxes probably isn’t something you imagined when you were dreaming about your new life in Germany. But that doesn’t mean it has to ruin your experience here.
Originally from New Zealand, I’ve been a freelancer in Germany for four years now. After the first couple of years where I paid an accountant to manage my taxes for me, I eventually learned how to manage my own freelance income taxes, saving myself thousands of euro each year and earning some serious German kudos.
Here I cover how you, too, can successfully manage your freelance income taxes in Germany.
Are you a freelancer?
In order to be considered a Freiberufler (or Freelancer) in Germany, you need to be offering some kind of service. So you might be a doctor, a journalist, a painter or an accountant.
If you’re running a business that sells products, then you’re classed as a Gewerbetreibende , or tradesperson. We will deal with how to manage your taxes as a Gewerbetreibende in a separate post. Here we cover how to manage your income taxes as a freelancer in Germany.
How freelance income tax works in Germany
The German financial year runs like the calendar year: from January 1 to December 31.
For the first whole financial year that you are a freelancer in Germany, you will need to save up your income tax for the entire year . Yes, it’s a drag – I recommend getting a savings account, putting your contributions in there and trying not to look while you do it.
If you become a freelancer part-way through the year, then you will need to do this for the remaining part of the year, and the entire next year.
Thankfully, reprieve is in sight! Once you make it through an entire financial year, dutifully saving up your income tax, you will be allowed to move on to making quarterly payments, which will be determined in advance by the Finanzamt , or tax office.
This means you will pay a predetermined amount to the tax office at the end of each quarter, so you’ll no longer feel as if you’re working blind. The only thing to watch out for here is if your income increases during the year, you’ll need to save up a bit extra to make sure you’ve covered yourself when it’s time to make the annual tax return – you’ll have to pay the outstanding amount.
On the other hand, if your income decreases, you’ll be getting a nice deposit from the tax office, straight into your bank account. At the end of each year, the Finanzamt will adjust your quarterly payments in accordance with your previous year’s earnings.
Hot tip : if you aren't feeling safe with this method, you can always contact the Finanzamt and ask them for quarterly payments. Then you don't need so much discipline.