How to Get a Tax Number
So, you’ve registered and are ready to set up your freelance business. Have a glass of bubbly! Celebrate! Ok. Enough now. Time to get serious.
After registration, the federal tax authority will automatically send you a tax ID number or Steuer-Identifikationsnummer (that word is about 100 letters long, isn’t German incredible?!). This is needed for social benefits and by employers. But as a freelancer you will need an additional number, called Steuernummer . This number will need to go on to your invoices and should be quoted in any communication with the Finanzamt (tax office). To obtain the Steuernummer you need to apply for it at the Finanzamt . You can do this by contacting your local tax office in writing or making an appointment. You will be asked to fill out a pretty crazy form called Fragebogen zur steuerlichen Erfassung in German – and this is where it’s time to invite your German bestie for dinner! Not least because this form goes into the real nitty-gritty of your business plans including profit estimation, which leads us on to the next question:
Umsatzsteuer – Do I Need to Charge VAT (And How Much Do I Charge)?
Whether you’re a writer, dancer, developer or on track to become a famous freelance pooch walker – at some point you will most likely have to deal with the issue of paying VAT (value added tax). You may hear people talk about VAT as both Umsatzsteuer and Mehrwertsteuer – essentially, both mean the same thing.
The first time you may be confronted with this is when filling in the Fragebogen zur steuerlichen Erfassung and estimating your revenue. Based on this amount, the tax office will determine whether you need to charge VAT. Important to know: If your annual revenue is under 17.500€* in the first year and no more than 50.000€ in your second year of freelancing, you don’t have to charge VAT.
There are pros and cons to this . Pros : if you are selling a service to private customers rather than businesses, your prices can be lower/more competitive. VAT doesn't, however, make a difference to businesses because they can claim it back. You also don’t have to deal with VAT returns.
Cons : If you don’t add VAT, then you in turn can’t claim back VAT that has been added to items or services that you’ve bought and that are related to your business. So, for example, if you are a freelance photographer and have a lot of expenses for equipment, it may work in your favour if you can get back the VAT added to these items.
If you reckon that you are not eligible to pay VAT, then you will be regarded as a Kleinunternehmer (= small tradesman/business). You will have to add a sentence to your invoices indicating this, for example “Gemäß § 19 UStG wird keine Umsatzsteuer berechnet” .
If you are eligible to charge VAT, then you will also have to submit monthly or quarterly VAT returns and this is done electronically. The easiest way is to use the free software supplied by the tax office called ELSTER. If you are unsure about doing this, it may be worth consulting a tax advisor or accountant who can do this for you. You will also have to do an annual VAT return which needs to be submitted by the 31st of May of the following year (unless you have a chartered accountant and then this cut-off date can be extended.)