Freelancing and self-employment is a lifestyle choice that can also have deep impacts on your long term life plans, especially if you are - dun dun dun - an Ausländer. For many, the decision to be a freelancer or self-employed person in Germany is often a part of a much longer term plan that can often involve the need for long term European or German residency. No matter if you are getting prepared for it or if you are no in a position to apply, let’s cover off the basics in this blog!
Now, some topics are much easier to tackle - for example, you can now use Kontist with Apple Pay. Immigration in Germany is notorious for being slow, hard and ultimately coming down to the mood and feelings of a Beamter. For this author and my last appointment, I was told that I had ‘’provided too much information’’ and now she would have to spend ‘’too much time’’ on the application.
I had simply brought everything they had asked for and put it in the order their email stipulated. The point is - damned if you do, damned if you don’t. Before we get started, it is really important to note that the German system, in particular, makes a big differentiation between freelance and self-employment for the decision around long term residency, that being of course - a self-employed person has a term of three years before they can apply and a freelancer has five years.
From time to time it is not that easy to finally classify your own profession as freelance or not. How difficult it can be to make a distinction should be shown using the profession of a photographer:
For example, if you work as a photographer at weddings and take portraits or passport photos, but also advertising photos for brochures, they usually view this as a business. However, if you work artistically as a photojournalist or as a landscape photographer, you can do this job as a freelancer, because you create your pictures based on individual observation.
Typically, this type of photo will interest a wider range of people. If you are unsure how your activity should be classified, then you should contact the tax office before registering your self-employment in order to avoid any additional tax payments if you register incorrectly. There are also certain income requirements that could influence this decision.
Secondly, the most important thing to remember if you are considering long term residency: make sure your taxes are paid. There can be no question: if you have any outstanding taxes or undeclared income you may face difficulties in getting your application processed. As a quick reminder, here are the two most important taxes to ensure are paid as a self-employed person - outside of your own income tax (which, is essential as a freelancer what you will pay anyway):
1) Sales tax (VAT) is levied on the sale or exchange of products and services by companies. In principle, all entrepreneurs, including the self-employed, freelancers and freelancers, are obliged to pay the sales tax to the responsible tax office. The standard tax rate is in accordance with Section 12 of the Value Added Tax Act (UStG) 19 percent .
Products and services that are part of the basic requirement are taxed at a reduced rate of 7 percent . These include, for example, groceries, public transport tickets, hotel accommodation or products protected by copyright.
2) The Trade tax (GewSt) is an income tax that must be paid by all traders. Freelancers as well as forest and agricultural companies are completely exempt from paying trade tax. The trade tax return must be submitted once a year. The deadline is July 31. The trade tax is due quarterly in the form of advance payments. According to the tax dates 2021, the trade tax will be due on February 15, May 17, August 16 and November 15, 2021.