Starting a freelance activity
Tax advice when starting a freelance activity in Germany – from distinguishing it from a commercial activity and tax registration to ongoing EÜR.
For liberal professions, the correct tax classification is important: it affects trade tax, registration, profit determination, VAT and later filing obligations.
Freelance or commercial?
Not every self-employed activity is automatically freelance for tax purposes. The decisive point is the classification under section 18 EStG. An incorrect classification can later lead to corrections for trade tax, registrations and filing obligations.
Catalogue professions and similar professions
Freelance activities include, in particular, the catalogue professions listed in section 18(1) no. 1 EStG and similar professions. The specific qualification and the actual activity are decisive.
Commercial activity
If there is no freelance activity, a commercial activity may be assumed. In that case, trade registration and trade tax in particular must be reviewed.
Mixed activities
If freelance and commercial services are provided side by side, they must be considered separately. For partnerships, commercial infection under section 15(3) no. 1 EStG may become relevant.
Qualification and activity description
Training certificates, professional licences, service descriptions, contracts, website texts and actual work processes may be relevant for classification.
Important tax topics
The commencement of a freelance activity must be notified to the German tax office. The tax registration questionnaire forms the basis for the tax number, advance payments and VAT classification.
Freelancers often determine their profit by Einnahmen-Überschuss-Rechnung under section 4(3) EStG, unless voluntary balance sheet accounting is used.
Freelancers may also be VAT entrepreneurs. In particular, section 19 UStG, exemptions, invoice requirements and input VAT deduction must be reviewed.
Pure freelance income is not subject to trade tax. For commercial or mixed activities, the classification must nevertheless be examined critically.
Typical topics include work equipment, training, professional liability insurance, software, travel costs, domestic study, telephone and internet.
Based on the profit forecast, the tax office may determine income tax advance payments and, where applicable, VAT pre-filing periods.
Typical freelance starting situations
The following overview does not replace a case-by-case review. It only shows situations in which the tax classification is often particularly relevant.
Consulting activities
Consulting activities are not automatically freelance. The decisive factors are qualification, professional content, personal responsibility and the specific type of service.
Artistic and journalistic activities
Artistic, literary or journalistic activities may be freelance. The distinction depends strongly on content, creative level and actual service delivery.
IT and technical activities
For IT services, classification is often contentious. Software development, project work, consulting and operational services must each be considered separately.
Part-time activity
Part-time activities can also be relevant for tax purposes. Profit intention, VAT, filing obligations and the distinction from hobby activity must be reviewed.
Process of tax support
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Describe the activity — Presentation of the planned services, qualification, target customers, start date and expected revenue.
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Review classification — Review whether a freelance activity under section 18 EStG or a commercial activity is more likely.
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Tax registration — Preparation of the tax registration questionnaire and coordination on VAT, profit forecast and advance payments.
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Ongoing structure — Coordination of invoices, documents, business expenses, EÜR and later tax returns.
Required information
For the initial classification, the activity description, qualification and economic planning are particularly relevant.
Description of services
Which services are provided, for whom, on what basis and with what professional responsibility?
Education and professional experience
University degree, vocational training, licence, certificates, references or other evidence of professional qualification.
Revenue and profit forecast
Expected income, business expenses, investments, ongoing costs and realistic profit estimate for the starting year and the following year.
Invoices and documents
Planned invoicing, business bank account, document filing, software, payment service providers and possible foreign elements.
Typical risks
Do not assume freelance status too quickly
The label “freelancer” or “consultant” is not sufficient for tax purposes. The decisive factor is the specific activity within the meaning of section 18 EStG. Incorrect classification can later lead to trade tax, amended returns and additional coordination effort.