FAQ: Self-employment and business in Germany

Both are forms of sole proprietorship (Einzelunternehmen); the difference lies in the nature of the activity and in which section of the law applies. Freiberufler (liberal profession, Section 18 of the Income Tax Act) means personal intellectual, creative, scientific, educational or therapeutic work: doctors, lawyers, tax advisers, engineers, architects, journalists, translators, teachers, artists. Gewerbe (trade business, Section 15 of the Income Tax Act) — commerce, brokerage, craft, any systematic activity for profit not falling under §18.

• Freiberufler: registration with the Finanzamt (tax office) only, no Gewerbesteuer (trade tax), no membership of the IHK/HWK (chamber of commerce/chamber of crafts), always simple accounting (EÜR).
• Gewerbe: first a Gewerbeanmeldung (trade registration) at the Gewerbeamt (trade office), there is trade tax (taking into account the €24,500 allowance), compulsory membership of the IHK/HWK.

The final classification is made by the Finanzamt based on your description of activities (Tätigkeitsbeschreibung) in the questionnaire. You cannot simply “appoint” yourself a Freiberufler, but the exact wording of the type of activity is what decides the outcome—which is why it is important to word it as closely as possible to the catalogue in Section 18 of the Income Tax Act.

You can check your status using your assigned tax number and the letters you receive: for a Gewerbe the Gewerbesteuer appears in the tax assessment notices (a request for a Gewerbesteuererklärung – trade tax return – arrives, marked with a “G”), while for a Freiberufler there is nothing of the kind — only income tax and, where applicable, VAT.

IT is the most contentious case. Software development can count as either a liberal profession or a Gewerbe. Freelance status is recognised if the work is equivalent to engineering (ingenieurähnliche Tätigkeit): architecture design of complex systems, analytics, consulting. Then you are a “consulting engineer/computer scientist”.

A classic problem: without a relevant degree (computer science/engineering), the Finanzamt often requires proof of “comparable qualification” – via a portfolio, certificates, and project descriptions. Otherwise, they classify you as a Gewerbe. Simple coding based on a specification, hosting, selling pre-made licences, or SaaS subscriptions is usually a Gewerbe.

Artists, musicians, writers and journalists are explicitly named in Section 18 of the Income Tax Act — Freiberufler; no degree is required: what matters is independent creative (eigenschöpferische) work. But the line is drawn by whether you sell a service/work or a product: unique commissioned work → liberal profession; reproduction and sale as a commodity (prints, merch, finished tracks, commercial photography) → in this part, Gewerbe.

It depends on the type. Freelance — “beratender Betriebswirt/Ingenieur/Volkswirt” (consulting business economist/engineer/economist) with relevant professional training covering the core functions of a business, as well as legal, tax and medical consulting. Gewerbe — general business, marketing, SMM/SEO, esoteric consulting and coaching without a relevant degree, as well as advertising and affiliate.

To get started, the vast majority of freelancers should register as an Einzelunternehmen (sole trader) — no share capital required, minimum bureaucracy, simple EÜR accounting. Other forms are needed for partnerships, liability or turnover.

• Einzelunternehmen — 1 person, no capital, full personal liability. For Freiberufler and small Gewerbe.
• GbR — simple partnership of 2+ partners, no capital, joint and several personal liability. Formed by agreement.
• UG (haftungsbeschränkt) — “mini-GmbH”, with a minimum share capital of €1, limited liability, but required to set aside 25 % of its profits in a reserve until the total reaches €25,000.
• GmbH — share capital €25,000 (minimum €12,500 to be paid in), limited liability, full bookkeeping and balance sheet, notary and tax advisor services.

Yes, a person can simultaneously engage in both liberal and commercial activities (e.g. IT consulting + selling a ready-made product). The condition is that you keep them separate: separate accounting of income/expenses, different schedules in the tax return (Anlage S for Freiberufler, Anlage G for Gewerbe), and two tax numbers if necessary.

Registration is done via the electronic questionnaire “Fragebogen zur steuerlichen Erfassung” in the portal Elster (elster.de). A separate application or visit to the Finanzamt is not necessary — following the questionnaire, you will be assigned a Steuernummer (tax number). A step-by-step walkthrough of getting started can be found in the Finber guide to freelance registration.

• Freiberufler: only this questionnaire at the Finanzamt. The Gewerbeamt is not needed.
• Gewerbe: first a Gewerbeanmeldung (GewA1 form) at the Gewerbeamt/Rathaus, after which the Finanzamt will send the same questionnaire itself.

Officially — a few weeks; based on chat experience usually 2–6 weeks, sometimes up to 2–3 months. There is no need to submit the application again — this only pushes back your place in the queue.

You can work and sign contracts immediately. An invoice can also be issued by adding the note “Steuernummer wird nachgereicht” (tax number to follow) to it and sending the number later, or by issuing the invoice after receiving the number. The date of the provision of the service is not lost in the process.

There is no single classifier (analogous to SIC) — the type is described in words, and the precision of the wording determines whether you are classified as a Freiberufler or a Gewerbe. The guideline for a liberal profession is the catalogue in Section 18 of the Income Tax Act (catalogue professions: engineer, architect, journalist, translator, teacher, artist, etc.) and “comparable professions”.

You can specify several types of activity. If some of them are commercial, they are accounted for separately.

In the questionnaire, you forecast turnover and decide whether to apply the Kleinunternehmerregelung (small business scheme, no VAT charged). The new thresholds apply from 2025: up to €25,000 for last year and up to €100,000 for the current one (previously 22’000 / 50’000). If you are within this limit, you don’t need to charge VAT.

• Plus: no need to charge VAT or pay it over to the Finanzamt, no quarterly VAT returns, simpler invoices.
• Minus: you cannot reclaim incoming VAT (Vorsteuer) on purchases. This is disadvantageous if there are large initial expenses or if your clients are companies that can reclaim VAT anyway.

Only for a Gewerbe. A Freiberufler does not register a Gewerbe. For a Gewerbe, the procedure is as follows: fill in form GewA1 at the local Gewerbeamt / Ordnungsamt / town hall (often online), fee ~€20–€65. After that, the Finanzamt will automatically send the tax questionnaire, and the data will be forwarded to the IHK/HWK (membership is compulsory, but for small businesses the fee is often minimal or waived).

This is about two different numbers. Steuernummer – allocated by your Finanzamt; it appears on invoices and tax returns within Germany. USt-IdNr (VAT identification number, format DE + 9 digits) – issued by the Federal Central Tax Office (BZSt); it is needed for intra-EU B2B transactions (reverse charge, ZM – EC Sales List).

You can apply for a USt-IdNr by ticking a box on the form or later online on the BZSt website — free of charge.

Income tax is paid on profits (income minus expenses), and not on turnover. Self-employment profits are combined with your other income (for example, a salary), and a progressive scale is applied to the total amount.

• Grundfreibetrag (basic tax-free allowance) 2026: €12,348 per person per year (2025: €12,096; for married couples filing jointly, double that at €24,696). This is the annual, not the monthly, amount.
• The rate rises from 14 % to 42 %; 42 % begins at approximately 69 879 € of taxable income (2026); the top rate of 45 % (“Reichensteuer”) applies from approximately €277,826.

If the tax is expected to be significant, the Finanzamt sets quarterly prepayments by a separate decision (advance payment notice). The deadlines are 10th March, 10th June, 10th September and 10th December. At the end of the year, they are factored into the final calculation of the tax assessment notice (Steuerbescheid): you either pay the difference or receive a refund.

For the self-employed, filing a tax return is mandatory (Pflichtveranlagung – compulsory assessment). The standard deadline is 31 July of the following year, if you file it yourself.

• Tax return for 2024 – due by 31.07.2025 (if you file yourself) / ~30/04/2026 (via a tax adviser).
• Tax return for 2025 – due by 31.07.2026 (if you file yourself) / ~30.04.2027 (via a tax adviser).

Usually, the better option is joint assessment (Zusammenveranlagung) because of “spousal splitting” (Ehegattensplitting). It includes: the main form (Mantelbogen) + Anlage N (spouse’s salary) + Anlage S (Freiberufler) or Anlage G (Gewerbe) + the attached Anlage EÜR (profit) + Anlage Vorsorgeaufwand (insurance) + Anlage Kind (children).

Yes. If you have a registered business activity, the tax return and the Anlage EÜR must be filed even in the event of a loss or zero income. A loss can be beneficial — it reduces total taxable income (including that of a spouse) or can be carried forward to other years.

It depends on the regime. If you are a Kleinunternehmer (Section 19 of the German Value Added Tax Act) — you do not charge VAT, it does not appear on your invoices, and you do not submit VAT returns. If you use the standard regime (Regelbesteuerung) — you add VAT to invoices, regularly report and remit it to the Finanzamt, but in return you get input VAT back on your purchases.

From 2025: up to €25,000 turnover for the previous year and up to €100,000 in the current one (previously 22’000 / 50’000). The threshold is calculated from turnover (revenue), and not from profit.

• Exceeding only the lower threshold (€25,000) switches you to the standard regime from the following year.
• You can voluntarily give up Kleinunternehmer status, but then you are bound by the regular tax regime for 5 years.

The standard rate is 19 %, the reduced rate — 7 % (books, food, cultural services and certain other services; most services provided by freelancers — 19 %). VAT is charged on top of the net amount: for a net amount of €1,000, the invoice total is €1,190 (19 %). To calculate the VAT from the gross amount, divide by 1.19 and multiply by 0.19.

The frequency depends on the amount of VAT for the previous year: > €9,000/year — monthly, €2,000–9,000 — quarterly, < €2,000 — annual filing is possible (thresholds raised from 2025). A Kleinunternehmer does not file a Voranmeldung at all.

• Deadline: by the 10th day after the end of the period. You can apply for a Dauerfristverlängerung (permanent one-month extension).
• For new businesses (2021–2026), the mandatory monthly regime for the first 2 years has been suspended — they are usually put on a quarterly basis.

For B2B (business-to-business) services, the place of supply is where the customer is based (Section 3a(2) of the German Value Added Tax Act), so you issue your invoice without German VAT.

• Within the EU you apply the reverse charge: on the invoice you state both VAT identification numbers (USt-IdNr) and the phrase “Steuerschuldnerschaft des Leistungsempfängers / Reverse Charge”. Such transactions must be reported in the Zusammenfassende Meldung (ZM, EC Sales List, § 18a UStG).
• For clients in third countries (US, UK, Switzerland, Ukraine), the service is “nicht steuerbar” (not taxable) in Germany: you indicate on the invoice that it is not subject to German VAT; no ZM is required.

Vorsteuer — incoming VAT paid by you on business purchases (equipment, software, services, the business share of car costs, etc.). Under the standard regime, you deduct it from your VAT payable, in effect recovering it. The condition is a valid invoice with itemised VAT and a business purpose for the purchase.

Trade tax is paid only by a Gewerbe — a Freiberufler does not pay it at all. For sole traders and partnerships, there is a tax-free allowance of €24,500 profit per year — up to that point, the tax is zero.

Formula: (profit − €24,500) × 3.5 % × Hebesatz (municipal multiplier). The Hebesatz is set by the municipality (ranging from approximately 200 % in rural areas to 500 %+ in large cities). The tax is paid to the municipality (not to the Finanzamt), with quarterly advance payments on 15 February, 15 May, 15 August and 15 November and the annual Gewerbesteuererklärung.

This is a common myth. For a sole trader, the trade tax largely counts towards income tax pursuant under Section 35 of the Income Tax Act — in the amount of 4.0 times the tax base amount (Messbetrag).

• With a Hebesatz of up to ~400 % the tax offset almost entirely compensates for the trade tax — the actual overpayment is close to zero.
• Above 400 %, there remains only a small difference of ≈ (Hebesatz − 400 %) × 3.5 % from the profit.

The mandatory invoice fields are listed in Section 14(4) of the German Value Added Tax Act (UStG):

• your and your client’s full name and address;
• your Steuernummer or USt-IdNr;
• invoice date and delivery/service date;
• sequential unique invoice number (without any gaps in logic, any format — e.g. 2026-001);
• quantity and type of service/goods;
• net amount, rate and VAT amount (for Kleinunternehmer — without VAT, with a note regarding Section 19 of the German Value Added Tax Act).

For invoices up to €250 gross a simplification applies (Kleinbetragsrechnung, §33 UStDV): your name/address, date, type of service, amount and VAT rate are enough — a separate customer address and invoice number are not mandatory. Convenient for receipts and small sales.

Accepting electronic invoices (structured format XRechnung or ZUGFeRD ≥ 2.0.1) in business-to-business (B2B) transactions has been mandatory for everyone since 01.01.2025 — including Kleinunternehmer. A working e-mail address is enough to receive them.

• Issuing e-invoices: in 2025–2026 you can still do it the old way (PDF/paper with the customer’s consent).
• From 01.01.2027 — mandatory for companies with a turnover > 800 000 €; from 01.01.2028 — for everyone in B2B.
• A Kleinunternehmer is exempt from issuing e-invoices (but must be able to receive them). Invoices ≤ €250 and invoices to private individuals (B2C) do not fall under the requirement.

You can write off what is truly necessary for the activity (business-related, Section 4(4) of the Income Tax Act). Purely personal expenses — no; mixed ones (phone, internet, car) — in the business proportion.

• equipment, software, professional literature, role-specific training;
• client visits: €0.30/km (from the 21st km €0.38) or actual expenses; business trips/hotels — if for business purposes;
• business trip meals: only lump-sum meal allowance (not “lunches”);
• home office proportion (see section 15);
• workwear — almost never (only protective clothing/uniform).

EÜR (Einnahmen-Überschuss-Rechnung) — simplified “income minus expenses” accounting under Section 4, subsection 3 of the Income Tax Act. It is submitted by everyone who is not required to keep a full balance sheet: Freiberufler — always, and Gewerbe — as long as the turnover is < €800,000 and profit is < €80,000 per year (Section 241a HGB).

It is filed as the electronic Anlage EÜR via Elster once a year along with the annual tax return (not quarterly). Income and expenses are accounted for on a cash basis (Zufluss-/Abflussprinzip, Section 11 EStG).

Up to €800 net (€952 gross), items count as low-value assets (GWG, §6(2) of the Income Tax Act (EStG)) and are written off in full immediately. More expensive items are depreciated (AfA) over their useful life.

No. Health insurance, long-term care and pension contributions for a self-employed person are not a Betriebsausgabe in the EÜR, but Sonderausgaben (special expenses, Section 10 of the Income Tax Act (EStG)). They are entered into the personal tax return (Anlage Vorsorgeaufwand) and reduce taxable income—the basic portion almost entirely.

In simple Kleinunternehmer/Freiberufler cases, many people keep their accounts themselves and submit their tax return via software. A tax adviser is usually hired in the case of turnover subject to VAT, clients from abroad, a UG/GmbH legal form, or when “everything has become a mess”.

• Accounting and invoicing: Lexoffice, sevDesk, Accountable, Kontist, Sorted.
• Annual tax return: WISO Steuer, SteuerGo, Taxfix.
• Elster — free official portal (interface is more complex). DATEV is a tool for accountants themselves, expensive.

Following the 2025 reform:

• invoices and accounting documents (Buchungsbelege) — 8 years (was 10);
• trade books, annual reports, inventories — 10 years;
• other business correspondence — 6 years.

Self-employed people usually take out insurance voluntarily with a Krankenkasse (statutory health insurer; freiwillig gesetzlich, GKV) or switch to private health insurance (PKV).

• GKV: Contributions depend on income, non-working family members are insured for free (Familienversicherung; from 2028, a surcharge of 2.5 % of income for a spouse unless there is a child under 12 in the household), and it is easy to switch back. It is expensive if you have a high income.
• PKV: cheaper for the young and healthy, tariffs built from the benefits you choose, but the premium increases with age, every family member pays separately, and returning to the GKV after the age of 55 is practically impossible.

The contribution is calculated on profit (Gewinn from the EÜR), not on turnover, and not on the amount including VAT. Rates for 2026: health insurance ~14,0–14,6 % + average Zusatzbeitrag (additional contribution) ~2,9 %, long-term care (Pflege) 3,6 % (4.2 % for childless people aged 23 and over).

• Minimum 2026: the contribution is calculated from the minimum base €1,318.33/month, meaning even with a low income, they pay ~€270/month (medicine + care).
• Maximum 2026: the assessment base is capped at €5,812.50/month, so the maximum is ~€1,190/month.

Until the Krankenkasse knows your profit, it may set the maximum contribution. You need to submit a realistic income forecast (Einkommensschätzung) — the contribution will then be recalculated. The first year is calculated on the basis of the forecast and finalised on the basis of your Steuerbescheid: the difference will be charged additionally or refunded.

For the majority of Freiberufler and Gewerbe owners, statutory pension insurance is optional — it is voluntary. But the law obliges certain groups (Section 2 of the Sixth Book of the Social Code (SGB VI)):

• independent teachers, lecturers, tutors, educators without employees;
• craftspeople, entered in the Handwerksrolle;
• midwives and some medical/social professions;
• artists and publicists (via KSK);
• self-employed individuals actually working for a single client (arbeitnehmerähnlich, i.e. quasi-employees).

The contribution rate is 18,6 % of income. Reference figures for 2026:

• Regelbeitrag (standard contribution) — €735.63/month;
• for newcomers (Existenzgründer): a half contribution of ~€368/month for the first 3 years (Section 165 of the Sixth Book of the Social Code (SGB VI));
• voluntary contributions — flexible: from ~€100/month to a maximum of ~€1,571 / month (18.6 % of the €8,450 ceiling).

Yes, if you in fact work for a single client and have no employees of your own, you will be classed as a “de facto employee” (arbeitnehmerähnlicher Selbständiger) and obliged to pay 18,6 % — sometimes retroactively.

Künstlersozialkasse (KSK) — not a separate insurance fund, but a mechanism which, for artists and publicists (designers, fine-art photographers, musicians, authors, journalists), covers half of the pension, health and long-term care contributions — just as an employer does for an employee. You pay approximately half of the contributions calculated on your declared annual income.

• Conditions: creative/journalistic activity as the primary one, no more than 1 employee, not in the form of a Gewerbe/trade.
• The minimum annual income to participate is 3 900 € (less is permitted for beginners in the first few years).

The minimum contribution period for a German pension is 60 months (5 years) of paid contributions. These same 60 months of pension contributions are one of the conditions for permanent residence (Niederlassungserlaubnis, Section 9 of the Residence Act).

In statutory health insurance, non-working or low-earning family members are insured for free, but under two conditions: your income is below the limit and you are not “hauptberuflich selbständig” (i.e. self-employment is not your main occupation). From 2028 this is no longer free for everyone: your spouse will pay their Krankenkasse a surcharge of 2.5 % of their income for you, unless a child under 12 lives in the household or another exemption applies.

• Income limit 2026: €565/month (2025: €535); for a minijob — up to €603. What counts is profit (Gewinn), not turnover.
• The second barrier is tougher: if being self-employed is your main activity, many Krankenkassen (often AOK) require you to have your own insurance even with zero income.

For the self-employed, Elterngeld is calculated based on profit for the last completed financial (usually calendar) year before the birth of the child, rather than on the 12 months before the birth. The basic amount is 65–100 % of the previous income, from €300 to €1,800/month.

• Entitlement is lost if the family’s/parent’s taxable income is over €175,000 (for births from April 2025).
• You can work while receiving it up to 32 hours a week; income in this period reduces the payout (profit is taken into account, not turnover).

Child benefit 2026 — €259 a month per child (2025: €255), independent of parents’ income. Applied for at the Familienkasse.

For a sole trader (both Freiberufler and Gewerbe), a separate bank account is not legally required — a self-employed person has no distinction between “personal/business”, for the Finanzamt correct bookkeeping and invoices are what matters, not the account type. A separate account is only compulsory for legal entities (UG/GmbH).

Popular options in chat: N26, Kontist, Holvi, Qonto, Finom, as well as the traditional Sparkasse/Volksbank. For foreign currency inflows, they often use Wise or Revolut.

A single client on its own is not yet a death sentence, but it is a strong indicator of risk. What matters is the substance of the relationship: if you are integrated into the client’s processes, work according to their instructions and schedule, without your own entrepreneurial risk — this may be deemed disguised employment (Section 7 of the Fourth Book of the Social Code (SGB IV)), even if a works contract has been signed.

Indicators: integration into the client’s organisation, subjection to instructions, fixed working hours/location, lack of own employees/equipment, single customer, lack of own advertising/client base.

• The consequences hit the client first (as the employer): back payment of social security contributions for past years (usually up to 4 years), possible criminal liability under Section 266a of the German Criminal Code (StGB).
• Reduce risk: multiple clients, own equipment/office/website, freedom in organising work, payment by results.
• A disputed status can be officially clarified through the Statusfeststellungsverfahren (Section 7a of Book IV of the Social Code (SGB IV)) with the Deutsche Rentenversicherung.

There is no universal rate. A practical method from the chat is to calculate upwards from the desired annual income: add up the required income + all expenses + insurances + taxes + holiday/downtime and divide by actually billable hours (there are noticeably fewer of them than working ones).

A verbal agreement is also valid in Germany, but written form is strongly recommended — it sets out the scope, deadlines, payment and liability; for standard services a short contract (Dienst- or Werkvertrag) is sufficient; AGB (general terms and conditions) are optional.

If you are a German tax resident, your tax return here must cover your worldwide income, including fees from foreign clients. Double taxation is avoided through double taxation agreements (DBA): tax paid abroad is generally credited against German tax (Section 34c of the Income Tax Act (EStG)).

For non-EU citizens, the basis is Section 21 of the Residence Act: a separate rule for liberal professions (§ 21 para. 5, simplified) and for trade/business (§ 21 para. 1, with an assessment of the economic interest and financing). The applicant needs a business plan / description of the activity, confirmation of clients / income, financial provision and health insurance.

• From abroad, you enter on a national D visa for the purpose of self-employment and then apply for a residence permit in Germany;
• while in Germany on another basis, it is sometimes possible to change status to §21 (Zweckwechsel).

Usually, they check whether the activity is genuinely carried on and provides a livelihood: tax documents (tax assessment notice/EÜR), invoices/contracts, proof of tax and contribution payments, valid health insurance, tenancy agreement.

It depends on what is permitted by your residence permit — see the note on the card and on the green supplementary sheet (Zusatzblatt): “selbständige Tätigkeit gestattet/erlaubt”.

• EU Blue Card / work residence permit: parallel self-employment is possible as a side activity (§21 Abs.6), sometimes a separate permit is required.
• Family reunification: any employment is often permitted, but check the residence permit insert.
• Studies: self-employment is usually restricted — permission is required.
• §24 (temporary protection, Ukrainians): employment is generally permitted by the authorities.

Two ways:

• Accelerated (Section 21(4) of the Residence Act): after 3 years, if the business is successfully established and a livelihood (including for the family) is secured;
• general (Section 9 of the Residence Act): after 5 years, which requires at least 60 months of pension contributions (voluntary or mandatory), knowledge of German (usually B1), financial self-sufficiency and accommodation.

This involves two different measures, which are often confused:

• Gründungszuschuss (§93 SGB III) — for people receiving ALG I (unemployment benefit) via the Agentur für Arbeit (Federal Employment Agency). The condition is a remaining entitlement to ALG I of at least 150 days. Phase 1: your ALG + 300 € 6 months; phase 2: 300 € another 9 months (at discretion).
• Einstiegsgeld (§16b SGB II) — for recipients of Grundsicherungsgeld (basic income support; Bürgergeld until 1 July 2026) through the Jobcenter; the amount and duration are at the discretion of the authority.

Two write-off options:

• Homeoffice-Pauschale: €6/day, maximum 210 days = €1,260/year (Section 4(5) sentence 1 number 6c of the Income Tax Act (EStG)). Without a dedicated room — suitable for most.
• Häusliches Arbeitszimmer (section 4(5) sentence 1 number 6b of the Income Tax Act): the proportion of all housing costs according to the office floor area, but only if it is a separate room and the centre of your activity.

If the car is used in business more than 50 % of the time, it is classified as business property, and expenses (fuel, repairs, depreciation, leasing) are written off, while personal use is subject to the 1 % rule of the list price per month or via a logbook (Fahrtenbuch).