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How to pay taxes if you are a Kleinunternehmer?

How to ask for a tax number?

In order to become a freelancer and pay taxes, one has to have a magical number — the freelance tax number ( Steuernummer für Freiberufler ). You may already have one tax number ( Steueridentifikationsnummer ), but do not let German bureaucracy fool you —this one is different. This is the number to put on all your invoices. Without it, you cannot bill your clients in Germany. To get this number you need to feel in an eight-pages-long form — Fragebogen zur steuerlichen Erfassung . You can download a form or pick it up at the local Finanzamt . In about four weeks after submission, your tax number will arrive at your postbox. Now you are ready to get paid for your work!

How much tax do I pay?

As a small entrepreneur, you can forget about VAT, but there is still income tax ( Einkommensteuer ) to pay. This is the difference between your gross ( brutto ) and your net ( netto ) salary. Your employer was separating it for you before, from now on, small entrepreneur, you have to do it yourself. Germany has a progressive tax scale which means that tax is ranging from 0 to 45% depending on your income. On top of that, 5,5% solidarity surcharge is added. All that combined is your income tax.

Income tax table for 2017

Taxable income bracket (EUR)Tax rate on income in bracket(%)
0 - 8,8200
0 – 17,6400*
8,821 – 54,05714-42
17,641 – 108,11414-42*
54,058 – 256,30342
108,115 – 512,60642*
256,304 – No limit45
512,606 – No limit45

*married couple filing a joint return Source: https://home.kpmg.com/xx/en/home/insights/2011/12/germany-income-tax.html

There is also a threshold under which the income is always tax-free. In 2017 the yearly tax-free income has increased to 8,822 EUR for a single person and 17,644 EUR for a married couple who files together. Even if your income is below this threshold, you still have to declare it. For a freelancer, it is crucial to be aware that not all money paid by clients is actually yours. Some of this will, in the end, go to the authorities in form of taxes. How much? Calculate your approximate income tax from your expected yearly income. If you are bad at math, you can use an online calculator, like this one. Then set this amount apart from the very beginning. And do not even think about touching it — at the end of the tax year, you will regret it. Do you need some help? Try this: Kontist - business account for freelancers !