Now, the party really starts…
So, you have gone through the process of getting started as a freelancer in Berlin, how the German tax year differs from your home country and what is due when and of course, you have a pretty strong idea what it takes to be Keeping the Finanzamt Happy. Well, we assume you have and if you haven’t be sure to head to those links above to make sure you do know - as we are about to head into some much deeper subject matter.
In Germany, it is often noted by expats that the system relies much less on taxpayers being able to use electronic systems for taxation management. Many users from the UK, US or Australia are also used to very simple, one page tax declarations that are inclusive of both added tax declarations and yearly tax declarations. However, here in Germany, there is a much different process. The government has a portal called ELSTER (ELektronische STeuerERklaerung = electronic tax return). Since its release in 1999, there are many other electronic platforms with which you can use to generate tax summaries. We are going to explore ELSTER in this article however, as it is the most comprehensive and direct way for individuals to submit their filings. The submission of filings are extensive protocols, and forthcoming on the Kontist blog will be more in depth and step-by-step processes to do this. In this article, we will explore the initial points of familiarisation with the tool that are highly necessary as foundational knowledge.
Of course, this process can be particularly daunting for non-English speakers - indeed. Often it can be hard enough to navigate a dinner order, let alone a highly nuanced system of specific terms and nation-centric taxation rules. That said, if you are serious about your freelancer future here in Germany and committed to managing your own tax affairs diving right into ELSTER is likely going to be the best in terms of creating a galvanised knowledge of the systems and the language relating to them. The other benefit of ELSTER is that is is free. Some people make take issue with a seemingly clunky interface, but that extraction of information is very thorough and lends itself to submitting a comprehensive, mistake free tax returns. You may not think you need this foundational knowledge, in which case, you would be surprised to hear stalwart expat freelancers stating they wish they had taken the time to fully understand what the system is, its purpose and things you will need readily available. These are the keys to building a knowledge bank, and staying compliant with tax laws and regulations at all times, and you’ll find the foundational knowledge brings you a much more successful, stress-free and efficient result.
History & Benefits
Know this: if it is from the German government, it has a history and a strict registration protocol. That’s just a broad rule of thumb you can accept into your freelancer heart! ELSTER is no different. ELSTER was invented as a means of responding to companies and individuals requesting the service, and the government trying to speed up the submissions. Since 2005, almost all employers and entrepreneurs liable to pay tax in Germany are obliged by law to process their employment tax returns and advance VAT returns as well as the employment tax statements of their employees electronically via the Elster system. This differs if you use the service of a Steuerberater, who have all their own kinds of nifty tools you don’t need to worry about. Of course, commonly with such products, there have been lengthy issues such as needing to install the system or the software not being compatible with any other operating systems beyond Windows. Blessed be, though, the ElsterOnline portal as well as the information pages were completely revised in July 2017 and have been available since then as “Elster: Your Online Tax Office” or Mein Elster (the former ElsterOnline portal). It is a web-based program, so no installation on the respective terminal is required. There are several options for data security and authentication.
Assuming you have already registered an address and registered as a freelancer (or, registered your intention to be a freelancer), you’re ready to register with ELSTER. If you have not done the latter you will need to complete a registration with the Finanzamt. Once submitted, you will receive a tax number under which you should conduct all business. This form is called Fragebogen zur steuerliche Erfassung, and you can access it here.
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Registering with ELSTER:
- Make sure you have all the registration documents from the Finanzamt, and all numbers necessary (for example, some of you may also require your VAT number if you’re eligible for it)
- It could be handy to have a German speaker close-by, or otherwise use a comprehensive tax glossary if you’re not familiar with the language
- Head to the ELSTER website
- Access the ELSTEROnline Portal via the link
- Access the Registration or Registrierung link
- Begin filling out your personal and freelancer business details
- Select your certificate type (this will depend on what kind of freelancer you are. If you have difficulty here, consult the FAQ
- Fill in further security data and personal information and send off your registration form
- You should now receive a confirmation that the process is underway
- You will be asked to verify yourself via the link provided, so do this. This will prompt the next communication.
- The next email will contain an activation number. Ensure you keep this email, and write down the number separately as it is crucial to log-in to the portal.
- You will wait (patiently) by the postbox to receive the final information needed along with an activation code - this could take up to 14 days
- Once you have this, re-open your activation email and follow the link to the Portal. Follow the link prompt for activating and first login in procedures.
- This process will generate an e-certificate. This software based certificate is crucial to keep as it essentially is your electronic signature and will be requested at various points, specifically logging in (yes, it is VERY different from WHEREVER you are from!)
This concludes the registration process. Next, you’ll need to be certain of what declarations you’ll need to be making. This will depend on weather you are a ‘Freelancer’ which is know as Freiberuflich or alternatively, your work type could fall under Tradesperson or Business, or Gewerbetreibende. The German government has provided definitions for freelance professions based on specific income tax law, and it can be handy to further verify what kind of self-employment classification you should be focused on obtaining - and therefore, what declarations you are liable for. There are three key taxes: Income Tax, VAT and Trade Tax. All of these require separate declarations. You will also need to have clear documentation regarding your health and social insurances/payments when you are submitting your declarations. Be sure you have a comprehensive definition for yourself and business practices so you do all the necessary declarations, and don’t do any unnecessary ones either.
And that, dedicated freelancers reading to this point, are the foundations for beginning with ELSTER. It would be remiss not to consider how vastly different and perceivably more difficult the German system is. However, you can rest assured, as with anything from your craft to your life - as long as you take the time to be educated and practice it consistently - it will become a part of a habit: managing your financial affairs as a freelancer in Germany. Needless to say at this point, it is serious business in Europe’s largest economy and the wisest certainly learn sooner rather than later, sticking to the rules and keeping on top of your game is the fastest and easiest way to a stress free freelancer life!
In the case some of the information was new to you, be sure to revise the process of getting started as a freelancer in Berlin, how the German tax year differs from your home country and what is due, when and ensure you know how to keep records for the ever practical *Finanzamt*. In the event you need urgent assistance, please consult a Steuerberater. For those wanting to know more about specific declaration guidelines for VAT and Personal Tax, stay tuned on the Kontist blog as these are topics we will be sure to cover in the near future. In the meantime, can one say, happy taxing? Yes! There can be happy outcomes from doing your tax, so happy taxing!