Freelancer’s Handbook in Germany
Contents

Preliminary information. Last updated: 02.05.2026. Internal links, external sources and key tax figures for 2026 have been verified: Grundfreibetrag (basic tax-free allowance), Kinderfreibetrag (child allowance), Kleinunternehmerregelung (small business scheme) thresholds, tax return deadlines and basic health insurance parameters. Rules may change, so please check with the Finanzamt (tax office), Ausländerbehörde (immigration office), Krankenkasse (statutory health insurer) or a Steuerberater (tax adviser) before submitting documents.

Foreword

Freelancing in Germany is a diverse and flexible path that can be an ideal solution for those who value freedom of choice, independence, and control over their work schedule. However, every step towards freelancing is a personal choice that depends on a multitude of factors: your personality, professional skills, and the current job market situation.

Some people like working alone, taking responsibility for projects and managing their own time. Others value a more stable schedule and a guaranteed flow of tasks from regular clients. It is important to understand that freelancing is not just freedom from office routines, but also responsibility for all aspects of running your own business: from finding clients and signing contracts to complying with tax and legal regulations.

Freelancing in Germany is subject to certain rules, whether registering as a member of a liberal profession (Freie Berufe) or as a business owner (Gewerbetreibende). Each of these paths has its own characteristics and bureaucratic nuances that require attention. This transition can be both inspiring and full of challenges, especially if you are not prepared for the complexity of administrative processes, tax obligations and continuous self-management.

However, with a well-planned approach and proper preparation, freelancing in Germany can become the key to professional freedom and development. It is a path that opens up new opportunities for growth, but requires a clear understanding of all its aspects and a readiness for continuous self-improvement.

“Do I even need this at all?” you think in the pauses between jobs. After all, every German accountant is so happy to help you fill out your tax return for a modest €200 an hour (yeah, as if you’ve got that kind of money!). And when a client says they’d like to “pause payments for a month”, you suddenly realise: all those risks are now on you. No sick pay, paid holidays or 13th-month salary. Just you, your computer and... your taxes.

So, do you need it? If you love adventure, the German language and bureaucracy — yes, of course! And if not, perhaps it’s worth rethinking your dreams of freedom and staying put in the comfortable role of a regular employee.

About the author

Hi! My name is Ilya Fedotov. I’ve been living in Germany for over eight years, and for the last two years I’ve been working as a full-time IT freelancer. I have over 20 years of experience as a Microsoft Solution Architect and infrastructure consultant, including major IT infrastructure migration and implementation projects for international companies such as Deutsche Bank, Fujitsu Services, and Infosys. This guide is based on my own practical journey in Germany: registration, dealing with the Finanzamt, annual tax returns, client acquisition, contracts, banking, insurance, and the day-to-day administrative routine of freelancing. I wrote it to help other IT professionals avoid common pitfalls on the path to self-employment. But let me warn you straight away: I am not a tax advisor, lawyer, accountant, or immigration consultant, so please take this text as personal experience and always verify important decisions with the relevant authorities or qualified professionals. In short: you’ve been warned 😊

I’ll make it clear right away: there will be no long explanations in this text about getting a freelancer visa (a separate chapter is dedicated to visas for that). But you will most likely need to go through the visa process yourself before you can fully register as a freelancer in Germany.

I look forward to hearing your comments and suggestions regarding this guide. You can always contact me via email at fedotov.ilya (at) gmail.com or through LinkedIn.

Chapter 1. Introduction

The general outline of the registration process looks something like this:

I want to be self-employed
Work permit
No
We’ll have to wait
Yes
Fulfilling additional requirements for Gewerbe registration
Gewerbe
Profession? Freiberufler (freelancer) / Gewerbe (trade business)
Freiberufler
Registering with Elster for access
Quickly
Registration and work quickly/in detail
In detail
Fragebogen zur steuerlichen Erfassung (tax registration questionnaire) via ELSTER online
Steuernummer (tax number) for the self-employed

Who are freelancers and Gewerbe owners in Germany?

In Germany, any activity must be clearly defined and classified, even when it comes to self-employment. Within this system, there are two main categories: freelancers (Freiberufler) and Gewerbe owners. Each of these categories has its own unique characteristics and requirements, regulated by German law.

Freelancer (Freiberufler)

A freelancer in Germany is a professional who provides services not related to trade or commerce. The main requirement is that the activity must be intellectual and require special knowledge. Such professions include doctors, lawyers, consultants, programmers, and other specialists. However, not all self-employed work falls under the freelancer category. The activity must be sufficiently intellectual for German law to recognise it as such. For example, simple computer repair does not count.

Freelancers are exempt from registration in the commercial register (Handelsregister) and from mandatory membership in the Chamber of Commerce and Industry (IHK), which significantly simplifies bureaucratic procedures. However, it is worth bearing in mind that not every activity can be recognised as freelance. If you want to find out whether you can obtain Freiberufler status, familiarise yourself with the requirements on the IHK website.

Gewerbe (business owners)

If your activity does not fall under the “intellectual” category according to state standards, you become the owner of a Gewerbe. Imagine a classic scenario: you open a shop, start trading goods or providing services, such as appliance repairs, and thereby become an entrepreneur. This sounds impressive, but it requires extra effort: you need to register your Gewerbe with the Gewerbeamt, the local trade office (Gewerbeanmeldung), pay trade tax and be prepared to deal with German bureaucracy.

Gewerbe owners have their own advantages. Firstly, you have the opportunity to expand your activities, hire employees and even attract investment. However, by choosing this path, you become an entrepreneur rather than a “free agent”, as in the case of a freelancer. If your goal is to scale your business and achieve serious growth, then the path of a Gewerbe owner is for you.

So which should you choose? If you are aiming for freedom and flexibility (with certain tax obligations), being a freelancer could be the ideal choice. However, if you have the ambition to build and grow your own business, the world of Gewerbe can open up new opportunities for you.

Main differences between a freelancer and a Gewerbe owner

One of the key differences is, of course, taxation. A Gewerbe owner is obliged to pay trade tax (Gewerbesteuer), which adds its fair share of bureaucratic duties and financial obligations, whereas freelancers are exempt from paying this tax. It feels as though the legislator said, “Alright, here is at least one relief for you, but do not get complacent!”

The bureaucratic quirks don’t end there. Freelancers get another advantage — a much simpler reporting and bookkeeping system. They don’t have to spend long nights behind a calculator and spreadsheets. Freelancers’ reports and tax returns in Germany say: “We’ll make it easier for you, but you’ll still have to do some work.” In contrast, Gewerbe owners are required to keep detailed records, fill out numerous documents and submit an annual trade tax return. This is a sort of “hardcore” mode of running a business.

It is important to remember that the Gewerbe registration process can vary significantly depending on the specifics of your activity. Therefore, should you decide to dive into this world, it is worth carefully reviewing the information and recommendations on this matter:

Lexoffice: Registering a Gewerbe 
IHK: Gewerbe registration

Thus, if you strive for control and are prepared for the complications with reporting, the Gewerbe world could be your choice. And if you prefer a simpler path, but with a few “sharp” moments, freelancing will probably suit you better.

Registration with Elster

1. Go to the Elster website
2. Click Next

Freelancer guide in Germany - illustration 1

3. Click Next

Freelancer’s Guide to Germany - Illustration 2

4. Select the section Certificate file and click Select

Freelancer’s Guide in Germany - Illustration 3

5. Select For me (and my partner) and click Next

Freelancer’s Guide to Germany - Illustration 4

6. Select With tax identification number

Freelancer Guide in Germany - Illustration 5

7. Enter your details in the Data Entry section, tick the box at the bottom (I confirm) and click Next

Freelancer’s Guide to Germany - Illustration 6

8. Pre-filling the income tax return:

If you want to use the same account jointly with your spouse or children, you can add their tax identification numbers here. Elster saves the data you enter in your tax return and automatically fills in, for example, the main forms the following year. If your details change by then, you can of course edit them. In any case, this will save you time and allow you to see what data you submitted in previous years. You have now entered all the necessary details and can click the “Check” button to review them once more before sending.

Freelancer’s Guide to Germany - Illustration 7

9. Registration confirmation

If you have entered all the details (marked in grey) correctly, click the “Submit” button. After that, you will receive an email to confirm the entered details. Click the activation link provided in the email. If the email has not arrived, wait a little while and also check your Spam folder. The link is valid for seven days. Then you will receive another email with instructions for activating your account and an important identification number (activation ID), which you must keep. 

Freelancer Guide in Germany - Illustration 8

10. Registration with Elster Online

As soon as you receive the paper letter by post with your second personal activation code (Aktivierungs-Code), follow the further registration steps. The letter should arrive within 14 days. If it does not arrive, contact the ELSTER support service.

In future, to access your personal account you will need the certificate you saved during registration + your login and password.

Fast Freiberufler Registration

1. Registering for en.getsorted.de.
2. On the main page, click Start registration.

Freelancer’s Guide to Germany - Illustration 9

3. We are filling out the standard application form Personal details. Be sure to state your occupation.
4. Filling in Business information. It is important to state your profession here so that the system can correctly determine whether you are Freiberufler or Gewerbe.

Freelancer’s Guide to Germany - Illustration 10

5. Section Tax Setup. Under profit determination method you will most likely choose single-entry bookkeeping. The second option (double-entry bookkeeping) is compulsory only for Gewerbe owners with a turnover of more than €800,000 or a profit of more than €80,000 a year; Freiberufler can choose the first option whatever their turnover.

6. Section Tax Estimation. Here you need to state your freelance situation, as well as your expected income for the current and next year. I am intentionally not providing details, as everyone has different life situations. Section Bank Account. As I wrote above, it is important that you have a separate account. Therefore, we put YES and provide the IBAN

Freelancer’s Guide to Germany - Illustration 11

Section 7 Review and Submit. In this section, you need to specify the Finanzamt for the region where you live and click Submit to the Finanzamt.

Detailed registration

Detailed registration implies that you log in to your personal account Elster and there you fill in the online form “Fragebogen zur steuerlichen Erfassung”.

I can recommend a detailed video on how to fill out the form in German from Steuerfit.

Video on Gewerbe registration (in German)

For Bavaria: Registering a business — applying for a business licence: Step-by-step guide for beginners

For Berlin: Register a business — completing the business registration: step-by-step guide 2023

Depending on where you live and the processing speed, confirmation of your registration as a freelancer for the specified activity, as well as your tax number, will be sent to you by post within 2 to 9 weeks.

Chapter 2. On taxes

Taxes are like a mandatory “quest” on the journey of any freelancer or business owner in Germany. Although not the most exciting one, it is certainly necessary, because if you don’t complete it, “unpleasant surprises” await you in the form of fines or questions from the tax office (and you really don’t want to mess with them!). In this chapter, we will look at the main types of taxes that both freelancers and Gewerbe owners need to pay in order to work legally and sleep soundly at night.

Types of taxes for freelancers/Gewerbe

1. Income tax (Einkommensteuer)

Freelancers and Gewerbe owners, like all taxpayers, are required to pay income tax. This tax is calculated on the basis of net income — the difference between total income and expenses associated with business activities. The income tax rate is progressive and depends on the amount of income:

  • Up to €12,348 per year (in 2026) — tax rate 0%.
  • Income ranging from 12’349 to 17,799 euros falls within the first progressive tax bracket, where the rate starts at approximately 14%.
  • For incomes between €17,800 and €69,878, the rate increases progressively to 42%.
  • For income between €69,879 and €277,825 — 42%.
  • Income in excess of €277,826 is subject to tax at a rate of 45%.

For example, on a taxable income of €80,000, the tax would not amount to 42%, as one might expect from the top-bracket rate, but would be around 28% (calculated for 2026 under the Grundtarif, the basic tax scale; around 28.4% including the Solidaritätszuschlag, the solidarity surcharge). This is because only the portion of income above a certain threshold is taxed at the higher rate. To work out exactly what percentage of tax is payable on total income, the average effective tax rate is used, which will always be lower than the highest marginal rate.

Income tax calculator.

2. Value Added Tax (VAT) or Umsatzsteuer

Most freelancers and owners of a Gewerbe are required to pay value added tax (Mehrwertsteuer, or Umsatzsteuer). The standard VAT rate in Germany is 19%, although a reduced rate of 7% applies to certain goods and services, such as books and most food products. Small businesses (Kleinunternehmer) are exempt: from 2025, the national thresholds are up to €25,000 in turnover for the previous calendar year and up to €100,000 in turnover for the current year.

3. Trade tax (Gewerbesteuer)

Freelancers are exempt from trade tax, which is levied on businesses carrying out commercial activities (Gewerbe). Owners of a Gewerbe pay this tax only on profits exceeding the Freibetrag (tax-free allowance) of 24,500 euros. The amount of tax is calculated as 3.5% of the profit (Messbetrag), multiplied by the Hebesatz (municipal multiplier) set by the local authority: a minimum of 200% (i.e. an effective rate of 7%) and up to 900% (approximately 31.5% in some municipalities). The Gewerbesteuer assessed may reduce Einkommensteuer under Section 35 of the Income Tax Act (EStG) — up to four times the Messbetrag, but not exceeding the tax actually paid and not exceeding the portion of Einkommensteuer attributable to income from the Gewerbe. In municipalities with a Hebesatz of up to ~400%, trade tax is often fully offset; however, with a higher Hebesatz or low Einkommensteuer, a residual tax burden remains.

4. Corporation tax (Körperschaftsteuer)

Freelancers are not required to pay corporation tax (Körperschaftsteuer), which is paid by incorporated companies (Kapitalgesellschaften) such as a GmbH, AG or UG, as well as by cooperatives (Genossenschaften). This allows them to save on tax compared with company owners.

VAT (Umsatzsteuer) and specific aspects of its payment

Value added tax (Umsatzsteuer) is levied on the majority of goods and services provided within Germany. It is important to know the specifics of its payment and to understand the differences between the two main methods of VAT calculation: Soll-Versteuerung (accrual-based VAT accounting) and Ist-Versteuerung (cash accounting).

1. Soll-Versteuerung (tax calculation based on invoicing)

Under this method, the freelancer is required to pay VAT at the time of issuing the invoice to the client, regardless of whether the invoice has been paid. This can lead to situations where taxes have to be paid before the actual money reaches the account. Soll-Versteuerung is recommended for companies and businesses with high liquidity.

2. Ist-Versteuerung (taxation on a cash receipts basis)

Under this method, VAT is paid only when the client actually pays the invoice. This method helps freelancers better manage their liquidity and reduces the risk of cash flow shortages. Freiberufler can apply Ist-Versteuerung regardless of their turnover (§ 20 para. 1 no. 3 UStG); simply submitting an application to the Finanzamt is sufficient. For Gewerbebetriebe, a turnover limit of €800,000 applies from 01.01.2024 (previously €600,000); exceeding this requires switching to Soll-Versteuerung.

3. Preliminary VAT returns (Umsatzsteuer-Voranmeldung)

Freelancers and Gewerbe owners are required to submit preliminary VAT returns (Umsatzsteuer-Voranmeldung) every month, quarter or year, depending on the amount of tax paid in the previous year:

  • If the taxes paid exceed 7’500 (€9,000 from 2025) euros per year, the return must be filed monthly.
  • If the taxes paid are between €2,001 and €9,000, the return is filed quarterly.
  • If the taxes are less than €2,000, the tax return is submitted once a year.


The return must be submitted by the 10th day of the month following the reporting period.

4. Advance tax payments

Freelancers and Gewerbe owners are required to make advance tax payments (Vorauszahlungen) to avoid a large lump-sum payment at the end of the tax year. Advance payments are determined based on the estimate of the anticipated income provided upon registration, or based on the previous year’s income.

How are advance payments calculated?

After registering with the tax office, a freelancer or Gewerbe owner needs to state their projected annual income ( Einkommensteuervorauszahlung – income tax advance payment ). Based on this data, the tax office calculates advance payments of income tax. Advance payments are made quarterly on the following dates:

  • 10th March,
  • 10th June,
  • 10 September,
  • 10th December.


Freelancers and Gewerbe owners only find out how much income tax they will have to pay at the end of the year. To avoid having to pay a large lump sum of tax, they make advance payments throughout the year. If your projected income changes during the year, you can request an adjustment to the amount of the advance payments from the tax office.

Recalculation and final payment of taxes

At the end of the year, a final tax return is submitted, on the basis of which the exact tax amount is determined. If your advance payments exceed your actual tax liability, the tax authority will refund the overpaid taxes to you. It is recommended to set aside money in advance for these payments so they do not come as an unexpected surprise.

If, however, the taxes were underpaid, the remaining amount will have to be paid within a month of receiving the tax assessment notice.

Tax optimisation and restrictions for freelancers

Tax burden optimisation is an important aspect for any freelancer striving to reduce their expenses. In Germany, there are several legal ways to optimise taxes, although it is important to understand that any deviation from the legislation can lead to fines and additional audits by the tax authorities. The main principle is that everything related to professional activity and having documentary proof can be deducted from the tax base. It is important to keep track of all invoices and documents, as well as to take into account the deadlines for submitting tax returns.

As a freelancer, it is important to know which expenses can be written off against tax in order to reduce your taxable base and pay less tax. However, not all expenses can be written off in full, and limits apply to some of them. In this article, we will look at which expenses a freelancer can write off and how to do it correctly in order to optimise tax deductions and avoid problems with the tax authorities.

What is an expense write-off?

An expense write-off is the process of reducing your taxable base (the amount on which taxes are calculated) by accounting for expenses incurred for carrying out your professional activity. For example, if you bought a computer for work, its cost can be written off against your income. Writing off expenses helps to lower the amount of tax you need to pay.

What expenses can be written off in full?

Full deduction means that you can claim 100% of expenses to reduce your taxable profit. Such expenses include office rent, office supplies, insurance premiums, professional consultancy fees and certain types of travel expenses. These expenses are directly related to your professional activities and are fully recognised as business expenses.

Examples of fully deductible expenses:

  • Office rent (Büromiete): If you rent a separate room for work, these expenses can be written off in full.
  • Office supplies (Bürobedarf): The purchase of paper, pens, folders and other work-related supplies is also 100% deductible.
  • Insurance (Versicherungen): Professional insurance policies, such as business liability insurance and the business section of legal expenses insurance, are fully tax-deductible.
  • Accountancy services (Beratungskosten): Tax and accounting consultancy, as well as other legal services.

What expenses are partially deductible?

Partial expenses are those that can only be claimed as a proportion of the total, as they may be used for both business and personal purposes. For example, if you host business dinners with clients, tax legislation allows you to claim only 70% of such expenses, as 30% is deemed to be for personal purposes.

Examples of partially deductible expenses:

  • Entertainment expenses (Bewirtungskosten): You can only deduct 70% of the net amount, but the VAT on these expenses can be reclaimed in full. For example, if you organise a business dinner with a client, only 70% of the cost of that dinner can be claimed as business expenses.
  • Using a personal car for work: If you use your personal car for work, you can only write off the portion that corresponds to business trips. Other expenses related to personal use are not deductible.

What expenses are deductible for VAT (VAT-only deduction / Abzug nur der MwSt)?

Some purchases, such as equipment or vehicles, can be written off taking into account the VAT that you paid upon purchase. However, the cost of the equipment itself may not be written off immediately, but in instalments through depreciation (Abschreibung, AfA). This is particularly important for large purchases, such as a car, which are used in business. Since 2021, computers and software can be written off in a single year.

Tax write-off restrictions

There are certain expenses that cannot be written off in full or that have limits. For example:

  • Client gifts (Geschenke an Kunden): If the cost of the gift exceeds €50, such gifts cannot be written off for tax purposes.
  • Subsistence expenses incurred during business travel (Verpflegungsmehraufwendungen): These expenses can only be written off within the limits set by the tax office. In Germany, there are daily allowance rates: €14 per day for trips lasting between 8 and 24 hours within the country, and €28 for longer trips. In other countries, the rates may be higher.

How to optimise tax deductions?

  1. Keep a record of all expenses. Keep all receipts and invoices related to your professional activities to easily verify your expenses with the tax authorities.
  2. Use depreciation for major purchases (AfA table) — link to the tables. If you have bought expensive equipment, you can write off its cost in instalments over several years (computers and software since 2021 in a single year, purchases up to €800 excluding VAT immediately). This will allow you to reduce your taxable base for a long period.
  3. Separate your personal and business expenses. If you use a car, phone or computer for both work and personal use, keep a record of how much time or resources are used for professional activities. This will help avoid problems during tax audits.
  4. Consult your accountant. A professional accountant or tax adviser will help you properly allocate your expenses and take advantage of all opportunities for tax optimisation.

Expense table

Below is a table showing which expenses can be written off in full and which allow only the VAT to be written off:

Freelancer’s Guide to Germany - Illustration 12

Work vehicle

When freelancers or other self-employed people use a company car for personal purposes, it is considered a withdrawal for private use (Nutzungsentnahme), which must be taxed. The German tax authority allows two main methods for calculating private car use: the logbook method (Fahrtenbuchmethode) and the 1% method (1-Prozent-Methode). Below is a detailed description of how these methods work and what factors should be considered when choosing them.

Vorsteuer (input tax) on car expenses

  • If you are entitled to Vorsteuerabzug (input VAT deduction), you can fully deduct the VAT on car expenses such as fuel, repairs and maintenance.
  • For example, if the total expenses amount to €9,450 including VAT (which corresponds to approximately €7,941 excluding VAT and €1,509 VAT), you can reclaim this €1,509 as Vorsteuer.

VAT on private use

When calculating the proportion of private use, VAT must be paid on it. For example, in the case of a logbook:

  • €1,928 (private use) = net amount.
  • 1’928 * 19% = 366.32 euros (VAT on private use), which must be repaid to the state.

1. Logbook method (Fahrtenbuchmethode)

This method requires freelancers to log every work-related trip, indicating the following details:

  • Date of travel.
  • Starting and ending points of the journey.
  • Odometer reading at the time of the start and end of the trip.
  • Purpose of visit and, if applicable, the name of the client or partner.

2. The 1% method (1-Prozent-Methode)

This method allows a freelancer to calculate the private use of a car based on 1% of the gross list price of the car (Brutto-Listenpreis) per month. There are also variations of this method for electric vehicles, where 0.5% or 0.25% is used.

Calculation example:

Example of calculation using the logbook method:

Suppose the total car expenses amounted to €9,450 per year. You drove 24’500 km, of which 19’500 km were for business trips and 5’000 km were private trips.
€9,450 * (5’000 km / 24’500 km) = €1,928 is the amount subject to tax for private use.

 

Example of a calculation using the 1% method:

Let’s assume that the gross list price of the car is €35,000. Using the 1% method, your private consumption will amount to:
35,000 euros * 1% * 12 months = 4,200 euros — this is the amount for private use of the car.

3. Adjustments: commutes to work (Fahrt zur ersten Betriebsstätte)

If you use your car for commuting (for example, from home to the office), you must add 0.03% of the gross list price for every kilometre travelled. For example, for a distance of 10 km and a car value of €35,000, you would add:

€35,000 * 0.03% * 10 km * 12 months = €1,260.

This amount is added to private expenses, but you can also write off travel expenses for commuting to work (Pendlerpauschale): since 2026, €0.38 for every kilometre of the journey, starting from the first (in 2022–2025 it was €0.30 for the first 20 kilometres and €0.38 from the 21st).

4. Tax breaks for electric vehicles

Various tax reliefs apply to electric vehicles and hybrids. From 2024, pure electric vehicles can be taxed at 0.25% of the gross list price, provided the vehicle has zero CO₂ emissions and its price does not exceed €70,000 (for purchases made after 31 December 2023) or €100,000 (for purchases made after 30 June 2025). If the price is higher, a coefficient of 0.5% applies.

Calculation example for an electric vehicle:

Let’s assume your electric car costs €52,000 and was purchased in August 2025. The cost falls within the €100,000 limit, so the 0.25% method can be applied:

(52,000 euros * 0.25%) * 12 months = €1,560.

Personal car for work

Freelancers in Germany can use personal cars for business purposes and deduct the associated costs from their taxes. This can significantly reduce tax liabilities if all the nuances are taken into account correctly. In this article, we will look at how freelancers can wisely use a personal car for work and what tax benefits can be obtained in the process.

1. Legal basis for writing off expenses

When a freelancer uses a personal vehicle for work tasks, such journeys can be recognised as professional, and the associated expenses can be accounted for as business costs. However, it is important to separate work and personal trips, as tax authorities require accurate record-keeping. In the event of incorrect accounting, the freelancer may be denied the deduction of a portion of the expenses.

2. How to separate personal and professional use of a car

To separate business and personal journeys, you need to keep a mileage log (Fahrtenbuch). This is a mandatory requirement if you plan to write off actual expenses. The log must record the following data:

  • Date of travel
  • Purpose of visit
  • Destination
  • Distance travelled (in kilometres)
  • Travel time

 

This logbook serves as proof of the business-use share of the vehicle and is used to calculate the proportional part of the expenses that can be written off against taxes.

3. Methods of expense accounting

There are two main methods for writing off car expenses:

  1. Actual expenses. This method requires you to record all actual vehicle costs associated with its operation: fuel, maintenance, insurance, vehicle tax, depreciation, and even parking. These expenses are then divided proportionally between personal and business use based on a mileage log. This is the most advantageous option if you frequently use your car for work.
  2. Fixed rate per kilometre. If you find it difficult to keep track of all your expenses, you can use a simplified method – writing off 30 cents for every kilometre driven for work purposes. This will still require you to keep a mileage log, but tracking individual car costs is not necessary.

4. Registering a vehicle to a company

If a car is registered to a company, all running costs, including purchase, insurance and maintenance, can be accounted for as corporate expenses. However, it is important to understand that the car becomes a company asset, which entails certain obligations. For example, you will have to account for the depreciation of the car and correctly calculate its use for personal needs.

In addition, if you use the car for both business and personal purposes, the tax authorities may treat the personal use of the car as a fringe benefit, which is also subject to tax.

5. Depreciation and amortisation

Car depreciation is the process of gradually writing off its value over several years. Depending on the cost of the car and its expected useful life, a freelancer can write off a portion of the value annually. This method is particularly useful if you bought a car specifically for business or use it predominantly for work purposes.

Calculation example

Let’s say a freelancer uses their own car for both personal and work purposes. The freelancer keeps a log of their journeys and determines that 60% of the car’s mileage relates to work-related journeys. Let’s consider two scenarios: calculation based on actual expenses and calculation based on a fixed rate per kilometre.

Total annual car expenses:

    • Fuel: €1,500
    • Insurance: €600
    • Maintenance: €300
    • Other expenses: €200
    • Total: €2,600

 

  • Actual cost method:
    Of the total expenses, 60% relates to business travel, so the following can be claimed:
    2600 × 0.60 = 1560 euros
  • Fixed rate method:
    A freelancer drove 8’000 km for business purposes over the year. Taking into account the fixed rate of 30 cents per kilometre:
    8000 × 0,30 = 2400 euros

 

As seen from the example, the flat-rate method allows more funds to be written off, but depending on the actual expenses situation, this method may not always be advantageous. A freelancer should analyse their costs and choose the most suitable option.

Kinderfreibetrag: tax allowance for parents

Raising children is not only a joy, but also involves significant financial costs. To support parents, the state provides tax reliefs, one of which is Kinderfreibetrag — child allowance provided in accordance with § 32 of the Income Tax Act (EStG). This allowance reduces the taxable base, resulting in a lower tax burden for parents.

Main points about Kinderfreibetrag:

  • Amount of the Kinderfreibetrag:
      • In 2023 the allowance is €8,952 for a child.
      • In 2024, the amount increases to €9,540 for a child.
      • In 2025, the amount increases to €9,600 for a child.
      • In 2026 the amount is €9,756 for a child.

This deduction includes two components: Freibetrag für das Existenzminimum des Kindes (allowance securing the child’s subsistence minimum) and Freibetrag für den Betreuungs-, Erziehungs- und Ausbildungsbedarf (deduction for care, upbringing and education).

  • Who is the Kinderfreibetrag available to:
      • The child allowance (Kinderfreibetrag) is available to all taxpayers with children — the tax class plays no role.
    • Married couples filing jointly (Zusammenveranlagung) receive the full amount. Unmarried parents usually receive half each, even if they live together.
    • Parents living apart can split the Kinderfreibetrag equally between them, with each receiving 50% of the total amount.
  • Choice between Kinderfreibetrag and Kindergeld: It is important to remember that parents can choose either Kindergeld (monthly child benefits), or Kinderfreibetrag. It is not possible to use both options at the same time. The decision on which is more advantageous for the parents is made by the tax authority based on the so-called Günstigerprüfung (checking which is more advantageous). As a rule, the Kinderfreibetrag becomes more advantageous if taxable income exceeds about €86,000 for married couples or €43,000 for single parents (calculated for 2026, one child).
  • How to claim the child tax allowance (Kinderfreibetrag): To use the Kinderfreibetrag, it must be stated when submitting your tax return. The tax office will carry out the calculation and state in the tax assessment notice (Steuerbescheid) which option turned out to be more advantageous: the Kinderfreibetrag or Kindergeld.

Additional allowance: Ausbildungsfreibetrag

If your child is 18 or over, in education (Ausbildung or university) and lives away from home (auswärtig untergebracht), you can also receive Ausbildungsfreibetrag (education allowance). This deduction is intended to cover expenses related to children’s education.

  • Until 2022, the Ausbildungsfreibetrag was 924 euros a year.
  • Since 2023, the amount has increased to €1,200 a year.


This allowance is granted in addition to the Kinderfreibetrag, provided you are still entitled to Kindergeld for a child who is in education.

Example of using the Kinderfreibetrag

Suppose you have one child and you decided to use the Kinderfreibetrag in 2024:

  1. Amount of deduction: €9,540* will be deducted from your taxable base.
  2. Tax cut: If you pay tax at the 30% rate, this will reduce your tax burden by approximately €2,862 (30% of 9,540 euros).


*2025
: €9,600

If your income exceeds the threshold for Kindergeld, the Kinderfreibetrag can provide you with a significant tax advantage.

How to track expenses and keep receipts?

For all these expenses to be accepted by the tax authorities, they must be properly documented. Every purchase or payment for services should be accompanied by a receipt or invoice indicating the date, amount, description of the purchase and the name of the vendor company. Since 2025, receipts and invoices (Buchungsbelege) must be kept for 8 years and accounting records for 10 years, so that you have evidence in the event of a tax audit.

Simplified deductions (Flat-rate allowances)

Some expenses can be written off without providing receipts and documents if the flat-rate deduction system is used. For example, the flat rate for using a home office is 6 euros for each working day spent at home, but no more than 1,260 euros per year (still applies in 2026). Other flat rates also exist, for instance, for minor office supply expenses.

Application of the Kleinunternehmerregelung scheme

From 2025, the national thresholds for the small business regulation (Kleinunternehmerregelung) are: turnover of the previous calendar year ≤ €25,000 and forecast for the current year ≤ €100,000. As long as you remain within these limits, you are exempt from the obligation to charge and remit VAT. If the limit is exceeded during the year, you must immediately notify the tax office (Finanzamt), switch to the standard regime and start submitting VAT returns.

The main drawback of KUR is the lack of the right to input VAT deduction (Vorsteuerabzug). Any major investments (equipment, machinery) cost more by the amount of input VAT. If you voluntarily waive KUR and choose standard taxation (Regelbesteuerung), this decision binds you for a minimum of five calendar years (§ 19 para. 2 UStG); you cannot return to KUR any earlier.

Please note that when calculating the annual turnover, all income from business activities is taken into account. If your turnover exceeds €25,000 during the year, the exemption continues until the end of that year, and from the following year you have to charge your clients VAT and file VAT returns. VAT becomes due immediately, from the transaction with which the limit is exceeded, if your turnover for the year exceeds €100,000 — or, in the year you start your business, €25,000.

For more detailed information, it is recommended to consult official sources, such as the German Federal Ministry of Finance (Bundesministerium der Finanzen), or to speak with a tax adviser.

Accounting for asset depreciation

Freelancers can write off the depreciation of major purchases (such as office furniture, equipment) over several years. This makes it possible to evenly distribute tax deductions across multiple tax periods. Since 2021, computers and software can be written off in a single year, and purchases up to €800 excluding VAT immediately.

Application of the Europäische Kleinunternehmerregelung (EU small business scheme) from 2025

Since 1 January 2025, a new rule for small business owners known as the Europäische Kleinunternehmerregelung has applied within the European Union. This rule aims to simplify tax administration for small businesses and sole traders, as well as to harmonise VAT requirements across different EU countries. In this article, we examine in detail how the new rule works, who can benefit from it and what advantages it brings.

The essence of the new rule

The Europäische Kleinunternehmerregelung allows small business owners not to pay value added tax (VAT) in other EU countries that offer such an exemption as well, provided their total EU-wide turnover does not exceed €100,000 a year. National thresholds have not been abolished: each country sets its own, of no more than €85,000 (in Germany, €25,000 of turnover in the previous year).

The essence of the new approach:

  • If an entrepreneur’s EU-wide turnover does not exceed €100,000 a year and their turnover in a particular EU country does not exceed that country’s national threshold, they may also be exempt from VAT in that country.
  • The exemption applies in those EU countries that have their own Kleinunternehmerregelung and saves you from having to register for VAT in those countries when selling goods or services abroad.
  • To maintain small business status, compliance with the new criteria is required every calendar year.

Who does this rule apply to?

The new rule applies to small businesses and sole traders registered in an EU country who meet the following criteria:

  1. EU-wide turnover up to €100,000 a year. This limit includes all income from the sale of goods and services both domestically and in other EU countries.
  2. Principal place of business. The entrepreneur must have their primary place of business in one of the EU countries.
  3. Voluntary use. The new rule is not mandatory. Entrepreneurs who benefit from remaining in the VAT system can continue to operate under the old rules.

Benefits

  1. Reduction of administrative burden: you don’t need to submit VAT returns, register in other EU countries or comply with complex cross-border trade rules.
  2. Simplification of accounting: less paperwork and reporting.
  3. Cost reduction: the lack of an obligation to pay VAT allows entrepreneurs to offer more competitive prices.

Limitations and exceptions

Despite the numerous benefits, there are certain limitations that must be borne in mind:

  • If EU-wide turnover exceeds €100,000 during the year, the entrepreneur immediately loses the right to VAT exemption in other EU countries and must register there as a VAT payer.
  • The exemption does not apply to the import of goods from countries outside the EU.
  • Certain activities, such as the sale of excise goods (for example, alcohol and tobacco), are excluded from this rule.

Application procedure

In order to take advantage of the new rule, the entrepreneur needs to:

  1. Register with the tax authorities of their country and apply to use the Europäische Kleinunternehmerregelung.
  2. Ensure that the annual turnover does not exceed the established limit.
  3. Keep records of income to confirm the right to VAT exemption.

Limitations and risks

It is important to remember that the tax authority closely monitors all attempts to illegally reduce the tax base. Attempts to conceal income or exaggerate expenses can lead to penalties and additional tax audits. Therefore, when optimising taxes, it is best to seek advice from a professional tax adviser.

Tax calculator

In addition to the theory, a link to tax calculators:

BMF-Steuerrechner (Finance Ministry tax calculator)
Steuertipps

Tax adviser search

Managing tax affairs in Germany can prove to be a complex task for most people, especially when it comes to sole traders, freelancers or business owners. This is precisely where a tax advisor (Steuerberater) comes to the rescue. In this article, we will look at why it is important to turn to specialists, in which situations this is necessary, how to properly choose a specialist, and we will also share useful resources for finding a tax advisor in Germany. It is not necessary to look for a Russian- or English-speaking advisor, as communication mostly takes place in written form and you will be able to calmly and leisurely translate all your queries via DeepL / ChatGPT.

1. What is a tax adviser and what services do they provide?

A tax consultant is a licensed professional who helps individuals and companies navigate tax matters. In Germany, tax consultants are required to be members of the Chamber of Tax Consultants (Steuerberaterkammer) and to pass a qualifying examination (Steuerberaterprüfung).

Tax adviser services may include:

  • Preparation and submission of tax returns (for both individuals and companies);
  • Consulting on tax planning and optimisation;
  • Preparation of company financial statements;
  • Support in tax disputes and proceedings;
  • Assistance during tax audits (Betriebsprüfung);
  • Tax accounting assistance for the self-employed, freelancers and small businesses.

2. When should you consult a tax advisor?

Certain categories of citizens should give particularly serious consideration to the possibility of working with a tax adviser. Here are several instances when the assistance of a tax adviser may be necessary:

  • Freelancers and sole traders: Being self-employed means having to keep track of all income and expenses yourself, as well as submitting tax returns regularly. Even a small mistake can lead to fines.
  • Business owners: Managing bookkeeping and tax reporting for companies is a complex and responsible task. A tax consultant will help avoid errors and optimise taxes.
  • Working with investments or income abroad: If you have income from other countries or invest in international projects, your tax situation becomes more complicated. A consultant will help you declare such income correctly.
  • Selling or renting out real estate: In these cases, various tax reliefs and exemptions are available which can be utilised, but only with a considered approach.
  • Tax inspection: If you are facing a tax audit, professional advice can significantly ease the process and protect your interests.

When can you do without a tax advisor?

Despite all the benefits of working with a tax adviser, there are situations when you can manage on your own and save on their services:

  • Low or irregular income: If your freelance income is low (for example, less than 20,000 euros a year) or irregular, and your tax situation is relatively straightforward, you can do without a tax adviser. In this case, the cost of professional services might be disproportionately high compared to potential tax savings. To file your return yourself, you can use online services and free software that will help you account for your main income and expenses.
  • Standard tax deductions: If you are only claiming standard tax deductions (for example, travel expenses, work tools, standard insurances), you probably will not need professional help to file your tax return. Standard deductions are easily entered in the tax return and do not require complex calculations.
  • Use of tax software: Today, there are many tax preparation and filing software programs that can be useful for individuals with a straightforward tax situation. Such programs usually offer step-by-step instructions that simplify the process and help to avoid mistakes.
  • Experience of filing a tax return independently: If you already have experience of submitting your tax return independently and your financial situation has not changed, you may be able to manage without the help of an advisor. Over time, many people acquire enough knowledge to handle their tax affairs on their own.

When should you consider a tax adviser depending on your income?

Income level directly affects the complexity of your tax situation and, consequently, the need for the services of a tax adviser:

  • Income of up to €20,000 per year: At this income level, the tax situation usually remains fairly straightforward. In most cases, if you do not have additional complex sources of income (such as foreign investments or rental property), you will be able to handle your tax return yourself using available online tools and software.
  • Income from €20,000 to €50,000 a year: As income increases, the tax situation becomes more complex. Questions may arise here regarding tax optimisation, accounting for business expenses and the use of tax reliefs. If your income is growing, it is worth considering at least a one-off consultation with a tax adviser. They will help you organise your bookkeeping properly and point out the main tax opportunities and risks.
  • Income over €50,000 a year: At an income above this threshold, especially if you work with multiple clients or manage large projects, the services of a tax adviser become practically essential. In this case, a professional will help to optimise taxes, account for all possible expenses, avoid mistakes that could lead to serious fines, and ensure sound financial planning.

3. How much do the services of a tax advisor cost?

In Germany, the cost of a tax advisor’s services is regulated by the Remuneration Regulation for Tax Consultants (StBVV — Steuerberatervergütungsverordnung). The amount of the fee depends on several factors:

  • Complexity and volume of work: The more complex the task, the higher the cost.
  • Your income: The higher your income or business turnover, the more time the consultant will spend on your tax returns.

 

Estimated prices for individuals range from 150 to 500 euros for the preparation of the tax return. For sole traders or small business owners, the amount can increase significantly depending on the complexity of the bookkeeping.

4. How to choose a tax adviser?

Here are a few tips on choosing a tax adviser:

  1. Check the licences and membership of the tax chamber. Every qualified tax adviser must be registered with the German Tax Adviser Chamber (Steuerberaterkammer). This ensures that they possess the necessary knowledge and undergo regular continuing professional development.
  2. Study the reviews and recommendations. An important criterion can be the consultant’s reputation among other clients. If you have acquaintances who have used the services of a tax consultant, ask for their opinion.
  3. Take the specialisation into account. Some tax advisors specialise in working with individuals, while others focus on small businesses or corporations. If you are a freelancer or a company owner, choose an advisor who has experience working with clients like you.
  4. Assess availability. It is important that your tax adviser is ready to answer your questions in good time, especially in the event of tax audits or if urgent submission of documents is required.

5. Where to look for a tax consultant?

Below are some useful resources where you can find a tax adviser in Germany:

  1. Steuerberater.de
    This is one of the largest directories of tax consultants in Germany. The platform allows you to filter consultants by location and specialisation.
  2. Steuerberater-Verzeichnis
    This website provides a database of certified tax advisers where you can search for specialists by city or region.
  3. DATEV eG
    DATEV, an eingetragene Genossenschaft (registered cooperative), brings together accounting and tax professionals. They offer a directory of qualified tax advisers who work using modern accounting technologies.
  4. Wirtschaftsprüferkammer
    The Chamber of Auditors of Germany (Wirtschaftsprüferkammer) keeps a register of auditors (Wirtschaftsprüfer), not of tax advisers. It is useful if you need an auditor for complex cases involving business or international operations.
  5. MeineStadt.de
    A portal for searching various specialists, including tax consultants, in specific cities and regions of Germany.

6. Conclusion

Tax legislation in Germany is quite complex, especially for those running a business or working as a freelancer. A tax advisor is not simply an assistant in filing returns, but sometimes a reliable partner who helps you avoid mistakes, optimise taxes and feel confident when dealing with the tax authorities.

Using the resources listed above, you will be able to find a reliable professional who is just right for you and will help you deal with any tax complexities.

If you have any questions about how to choose a tax adviser or what best to consider when searching, please leave a comment and we will be sure to help you!

We are looking into this in more detail on separate pages

  • Steuer-ID and Steuernummer (tax ID and tax number) — what the difference is, where to get them and what changes when you move
  • Income tax — § 32a tax rates for 2026 and two calculation examples
  • Tax classes — and why the amount deducted per month is not the same as for the year
  • Tax return apps — which app to use to file your Steuererklärung (tax return)
  • Investor taxes — Abgeltungsteuer (flat-rate withholding tax), Sparerpauschbetrag (saver’s allowance), Vorabpauschale (advance lump-sum tax on investment funds)

Chapter 3. Accounting and invoicing

Freelancers in Germany can use a simplified accounting system — Einnahmen-Überschuss-Rechnung (EÜR), which translates as “income and expense calculation”. Freiberufler can use it whatever their turnover, Gewerbe owners as long as their annual turnover does not exceed €800,000 and their profit €80,000. This system is simpler compared to double-entry bookkeeping.

EÜR highlights:

  1. Revenue: All money that goes into your account or in cash must be recorded in the accounts.
  2. Expenses: All professional expenses, including office rent, transport, marketing, equipment and other costs, are also recorded in the accounts.
  3. VAT deduction: If you are registered for VAT (Umsatzsteuer), you can deduct the VAT on purchases related to your professional activity.
  4. Final profit: Net profit is calculated as the difference between income and expenses. It is this amount that is subject to income tax.

 

The EÜR can be submitted electronically via the ELSTER portal, which is used for all tax operations in Germany. It can also be done via Getsorted or other accounting software.

How does the EÜR work?

In the EÜR, income and expenses are recorded when the money is actually received or paid out. This is called the Zu- und Abflussprinzip (cash basis principle):

  • Income is accounted for at the moment the money is deposited into the account (for example, upon card payment or bank transfer).
  • An expense is recorded at the moment the money is actually debited from the account.

 

A distinctive feature of the EÜR is that there is no need to use such complex accounting mechanisms as accrual accounting or provisions, which are required in the double-entry bookkeeping system. Depreciation (AfA), however, is accounted for in the EÜR in the same way as in double-entry bookkeeping.

Who is required to submit an EÜR?

The following categories of entrepreneurs are required to submit an EÜR:

  1. Small business owners (Kleinunternehmer), whose turnover did not exceed €25,000 in the previous year and does not exceed €100,000 in the current year (this is the VAT threshold; the right to use the EÜR does not depend on it).
  2. Freelancers, who work in the scientific, artistic, educational or consultancy fields.
  3. Sole traders, if their annual turnover does not exceed €800,000 and their profit does not exceed €80,000 (thresholds in force since 2024).

How to create and submit an EÜR?

To create and submit the EÜR, it is necessary to register on the portal ELSTER — the official online tool for filing tax returns in Germany. After registering, you will be able to complete a special form for the EÜR and submit it to the tax office.

Stages of creating an EÜR:

  1. Filling out the form: After registering with ELSTER, you will get access to the EÜR form, in which you need to enter all your income and expenses. Alternatively, you can do this via accounting software.
  2. Provision of documents: Although documents (invoices, receipts, etc.) do not need to be attached to the tax return, they must be kept in case of a tax audit. Since 2025, invoices and receipts (Buchungsbelege) are kept for 8 years and accounting records for 10 years.

What expenses can be included in the EÜR?

The following expenses can be taken into account in the EÜR:

  • Equipment costs (e.g. computers, furniture).
  • Transport costs (travel to clients, delivery of goods).
  • Training expenses and professional development.
  • Office rental costs or home office (if it is used for work).
  • Depreciation of assets that last for more than one year (for example, a car; computers and software can be written off in a single year).
  • Advertising and marketing costs.

Accounting software

Manual bookkeeping can be a complex and time-consuming process. Fortunately, there are many software solutions on the market that help automate bookkeeping, invoicing, VAT accounting and the preparation of reports for the tax authority.

Popular accounting software:

  1. Lexoffice(now Lexware Office) — one of the most popular software solutions for small businesses and freelancers in Germany. It offers simple bookkeeping, automated invoicing, VAT calculation and report submission via ELSTER.
  2. SevDesk — a cloud-based solution for freelancers that enables income and expense tracking, client invoicing, and online tax return submission.
  3. FastBill — a service that automates invoice, tax and payment management, simplifying work for freelancers and small companies.
  4. Getsorted — a popular accounting program for freelancers and small business owners in Germany. It is designed to make managing financial and tax obligations easier, especially for those without in-depth knowledge of accounting.

 

Each of these solutions has its own advantages, so it is important to choose the one that best suits your needs and type of activity. At the moment I use Lexoffice (now Lexware Office), as Getsorted doesn’t cover my needs.

Invoicing

In Germany, freelancers are required to follow strict rules when issuing invoices (Rechnung). Regardless of whether you provide services domestically, within the EU or outside of it, every invoice must comply with specific legal requirements. Non-compliance with these requirements can lead to the tax authorities refusing to recognise your expenses and income. In this article, we will examine which mandatory elements must be present on every invoice for it to comply with the law.

1. Contact details (Kontaktdaten)

Every invoice must show your full contact details as well as the customer’s details. This includes:

  • Your name or company name.
  • Address.
  • Phone number and email address.
  • Customer contact details, including name and address.

2. Invoice number (Rechnungsnummer) and invoice date (Rechnungsdatum)

Every invoice must contain a unique invoice number (Rechnungsnummer), which helps to identify and track the document. It is also necessary to specify the invoice date (Rechnungsdatum). The invoice number must be sequential and contain no duplicates.

3. Tax number (Steuernummer) or VAT number (Umsatzsteuer-Identifikationsnummer)

You are obliged to include your tax number (Steuernummer) on your invoice, which is assigned to you by the tax authorities. Instead, you can state your VAT identification number (Umsatzsteuer-Identifikationsnummer): one of the two numbers is enough. In cases where you work with clients from other EU countries, always include both your own VAT number and the client’s VAT number.

4. Description of services (Leistungsbeschreibung)

Each invoice must contain a clear and complete description of the services (Leistungsbeschreibung) that you have provided. It is necessary to state:

  • Type of service (e.g., consultancy services, software development).
  • Dates or the period during which the service was provided.
  • Number of working hours or volume of work performed.

This helps avoid misunderstandings with clients and confirms what is being charged for.

5. Prices and amounts (Preis und Betrag)

The invoice must show the following amounts:

  • Service cost excluding VAT.
  • VAT amount (Umsatzsteuer), if applicable.
  • Total amount including VAT.

If you operate under the Kleinunternehmerregelung (simplified scheme for small businesses), please state that VAT is not charged in accordance with Section 19 of the German VAT Act (UStG). For example: “Gemäß § 19 UStG wird keine Umsatzsteuer berechnet.” (No VAT is charged under Section 19 UStG.)

6. Payment terms (Zahlungsbedingungen)

The invoice must specify the terms of payment (Zahlungsbedingungen), such as the payment deadline and the available payment methods. For example:

  • Payment within 14 or 30 days of receiving the invoice.
  • Bank details for transfer (IBAN and BIC).

It can also be specified that late payment charges may be applied in the event of overdue payment.

7. What is an electronic invoice (E-Rechnung)?

An electronic invoice is an invoice that has been created, sent and received in a structured electronic format which allows for its automated processing. It is not simply a PDF or a scanned document, but data that can be immediately integrated into an accounting system. The main standards applied in Germany are ZUGFeRD and XRechnung.

Phased introduction of mandatory electronic invoicing

Phase 1: 1 January 2025 – 31 December 2026

  • Mandatory electronic invoice acceptance: All B2B companies must be ready to accept electronic invoices in prescribed formats (e.g. XRechnung or Factur-X).
  • Invoicing: remains optional; companies can continue using paper invoices, PDFs, and other formats. However, sending PDFs is only permitted with the recipient’s consent.
  • Preparation: At this stage, it is recommended to begin adapting systems for sending electronic invoices.


Phase 2: 1 January 2027 – 31 December 2027

  • For companies with an annual turnover of more than €800,000 for the previous year:
    The issuing of electronic invoices is becoming mandatory for all B2B transactions.
  • Companies with a turnover for the previous year of up to €800,000:
    may continue sending paper invoices or – with the consent of the invoice recipient – another format of electronic invoices, for example PDF.
  • EDI (electronic data interchange): remains a valid alternative.


Key exceptions

Certain categories of transactions are exempt from the requirement to issue electronic invoices:

  • Tax exemptions (e.g. medical services).
  • Small-value invoices up to 250 euros can still be submitted as “other invoices”, for example, in paper format. This also applies to travel tickets. Invoices for services that are exempt from tax under § 4 Nos. 8–29 (Value Added Tax Act) do not have to be issued as an E-Rechnung either.


Small businesses (Kleinunternehmer) (Section 19 of the Value Added Tax Act)

In accordance with the new provisions of the Jahressteuergesetz 2024 (Annual Tax Act 2024), which came into force on 1 January 2025, small business sales are exempt from VAT (without the right to input tax deduction). Therefore, they are not obliged to issue electronic invoices in the new format. Invoices may still be issued on paper or in another electronic format (e.g. PDF).

IMPORTANT: The obligation to receive electronic invoices remains for small businesses.

8. VAT Clause (Reverse charge for international transactions within the EU)

If you are invoicing a customer in another EU country and the reverse-charge system applies, this must be clearly stated on the invoice.

What does this mean?
In this case, the liability for paying VAT is shifted to the client. You do not charge VAT on the service, but you must include the appropriate wording on the invoice. For example:
“Steuerschuldnerschaft des Leistungsempfängers” (reverse charge: the customer pays the VAT).

What is important to remember?

  • Ensure that your customer has a valid VAT number that can be verified via VIES.
  • The transaction must be reflected in your tax reporting, including the Zusammenfassende Meldung (EC Sales List) in Germany.

Additional requirements for international transactions

1. Invoices for non-EU clients

If you provide services to clients located outside the EU, German VAT is usually not charged: for a business client, the place of supply is the client’s country (§ 3a Abs. 2 UStG, the German Value Added Tax Act). With private clients outside the EU, this only applies to some services, such as consultancy (§ 3a Abs. 4 UStG).

The invoice should state that the transaction is not subject to VAT in Germany. Example of wording:
“Nicht im Inland steuerbare Leistung.” (Service not taxable in Germany.)

2. Exchange rates

If the invoice is issued in a currency other than euros, you should:

  • State the currency exchange rate at the time of invoicing.
  • Clarify that payment must be made in euros or the equivalent amount in the specified currency.
    Example: “Zahlung in Euro oder in der angegebenen Fremdwährung zum aktuellen Wechselkurs.” (Payment in euros or in the specified foreign currency at the current exchange rate.)

Invoice template

Freelancer’s Guide to Germany - Illustration 13

By the way, accounting software and business online banking platforms already have built-in invoicing functionality, where you only need to fill in the missing fields.

Invoicing via website and online platforms

Stripe

1. What is Stripe and how does it work?

Stripe is an online payment platform that allows businesses and freelancers to easily accept payments over the internet. Stripe supports a diverse range of payment methods, including credit and debit cards, bank transfers, and local payment methods such as SEPA-Lastschrift (SEPA Direct Debit) and Klarna, which is particularly relevant for freelancers in Germany.

The main advantage of Stripe is its simplicity and flexibility. With Stripe, you can easily issue invoices, accept payments and manage financial operations without dealing with the complexities of traditional banking systems.

2. Benefits of using Stripe for freelancers

  • Ease of integration: Stripe offers simple integration with websites and platforms such as WordPress, WooCommerce, or even custom-built sites via the API. If you don’t have a website, you can still use Stripe to create payment links or issue invoices.
  • Support for various payment methods: Stripe enables you to accept payments via various methods, including:
    • Credit and debit cards (Visa, Mastercard, American Express, etc.)
    • Bank transfers (SEPA)
    • Local payment methods popular in Germany (SEPA-Lastschrift, Klarna)
    • Mobile payments (Apple Pay, Google Pay)
  • High level of security: Stripe is PCI-DSS compliant and uses advanced encryption technologies to protect payment data. This gives your customers confidence in the security of their data.
  • Payment process automation: Stripe provides the ability to automatically issue invoices, send payment reminders and handle recurring debits, which is particularly useful for freelancers working on a subscription basis or with long-term contracts.
  • Multi-currency support: Stripe allows you to accept payments in over 135 currencies, making it easier to work with customers from different countries.

 

3. How to set up Stripe to accept payments

Registration and account setup

  1. Create a Stripe account: Go to stripe.com and register. You will need to provide information about your business, such as its name, address, type of activity, and bank details for withdrawing funds.
  2. Complete the verification process: Stripe requires identity and bank account verification. To do this, you will need to upload identity documents (such as a passport or ID card) and provide a valid bank account.

 

Setting up payment methods

  1. Payment method selection: In your Stripe account, go to the Payments section and select the payment methods you want to offer your customers. For German customers, it is useful to set up SEPA Direct Debit, Klarna and other payment methods popular in Germany.
  2. Integration with your website: If you have a website, Stripe provides ready-made integration solutions, such as plugins for WordPress/WooCommerce or website builders. If you are developing your site yourself, the Stripe API provides a full set of tools for creating a customised checkout process.
  3. Creation of payment links: If you do not have a website, you can use the Payment Links feature in Stripe. This feature allows you to create a unique payment link that can be sent to a customer by email or via messaging apps.

 

4. Invoicing and payment processing

  1. Create an invoice: Stripe has a feature for creating and sending invoices to clients. This is especially useful for freelancers, as you can set up an invoice template, specify the description of services, quantity, and apply tax (if applicable).
  2. Payment received: Once you have sent the invoice to the customer, Stripe will notify you when the payment is made. The funds are credited to your Stripe account, and you can then withdraw them to your bank account.
  3. Automation: Stripe allows you to set up automatic debits, which is ideal for regular payments, such as when working on a subscription basis or for periodic payments for services.

 

5. Fees and withdrawals

  • Fees: Stripe charges a fee for each transaction. For standard EEA cards, the fee is 1.5% + €0.25 per transaction; for premium EEA cards, 2.8% + €0.25; for UK cards, 2.5% + €0.25; and for all other international cards, 3.15% + €0.25, plus 2% if currency conversion is required (Stripe pricing for Germany as of October 2026). Additional fees may apply for certain types of payments, such as international transfers.
  • Withdrawal of funds: Funds can be withdrawn to your bank account automatically on a schedule (daily, weekly, monthly) or manually. Funds usually arrive in the bank account within 2–7 days.

 

6. Particularities of using Stripe in Germany

  • Taxation: In Germany, freelancers are required to state VAT (Mehrwertsteuer) on invoices to clients if their annual turnover exceeds a certain threshold. Stripe allows you to automatically add value added tax to your invoices. Don’t forget to consult a tax adviser to set up the system correctly in accordance with the requirements of German tax law.
  • Local payment methods: Stripe supports popular payment methods in Germany such as SEPA Direct Debit and Klarna, making payment more convenient for your customers.

 

7. Practical tips for working with Stripe

  • Testing: Before you start accepting payments from customers, test the payment process using Test Mode in Stripe. This will ensure that everything is set up correctly and payments will go through without any hitches.
  • Use the reports: Stripe provides detailed transaction reports, making financial management and tax preparation easier.
  • Customer Support: Stripe offers an extensive knowledge base and support service that can be contacted in the event of questions or issues.

 

This extended section will provide the necessary steps and information for using Stripe effectively to accept payments in your freelance business in Germany.

Wise Business

What is Wise Business and how does it work?

Wise Business – an online service that allows freelancers and companies to send and receive international payments using real exchange rates. This means no hidden fees and currency conversion markups. The platform supports multi-currency accounts, making it ideal for those who work with clients worldwide.

The service is particularly useful for businesses that regularly issue invoices in different currencies. Wise Business simplifies the payment process and makes it transparent for both the sender and the recipient.

The benefits of using Wise Business for freelancers

  1. Low fees Wise Business charges a fixed fee and a percentage of the transfer amount. This is much cheaper than traditional bank transfers or using credit cards.
  2. Multi-currency accounts You can create virtual accounts in more than 40 currencies, including euros (EUR), US dollars (USD), British pounds (GBP) and others. This is convenient for working with clients from different countries, as you avoid unnecessary conversion costs.
  3. Invoicing The platform enables the creation of professional invoices detailing the cost of services in the desired currency. Clients can easily pay them by bank transfer or card.
  4. Real exchange rates Wise uses mid-market exchange rates without mark-ups, which allows you to save on international transfers.
  5. Integration with accounting systems The service supports integration with tools such as Xero and QuickBooks, making financial reporting easier.


How to set up Wise Business to receive payments

  1. Account registration Register on the Wise Business website by providing your business information. The registration process includes identity and company document verification.
  2. Adding currencies After registration, you can open a multi-currency account and tailor it to your business needs.
  3. Invoicing Use the invoicing platform, specifying the service description, cost and currency. The invoice can be sent to the client by email.
  4. Linking a bank account To withdraw funds, link a bank account to the platform. Wise lets you send money to 80+ countries.


Fees and withdrawal times

Wise Business charges:

  • Fixed fee: e.g., €0.50 per transfer.
  • Percentage of the transfer amount: for most currencies, it ranges from 0.35% to 1%.

Withdrawing funds to a bank account usually takes from a few minutes to 1-2 working days.


Features of using Wise Business in Germany

Working with international payments in Germany has its own nuances. Wise Business helps to efficiently resolve issues related to tax accounting, local requirements and customer convenience. Here are the key features:

1. SEPA payment support

SEPA (Single Euro Payments Area) is a standard for bank transfers in EU countries that provides fast and convenient transactions in euros. Wise fully supports SEPA payments, which offers the following benefits:

  • Fast transfers: Funds usually arrive within one working day.
  • Low fees: Unlike traditional banks, Wise charges minimal fees for such transfers.
  • Simplicity of operation: There is no need to enter the IBAN manually – the system automatically checks and simplifies the sending process.


2. Tax compliance

In Germany, all companies and freelancers are required to take tax aspects into account when issuing invoices. Wise provides features that simplify compliance with local legislation:

  • Including VAT (Mehrwertsteuer): The invoice can specify the tax rate (usually 19% or 7%) and clearly show the VAT amount. This is particularly important for customers registered as legal entities.
  • Report export: The platform allows you to export transaction data for any period, which is convenient for submitting your tax return or preparing for an audit.
  • Support for local tax codes: The option to specify a tax number (Steuernummer) or VAT identification number (USt-IdNr) directly in the invoice template.


3. Working with clients in Germany

For customers in Germany, it is important to use popular and familiar payment methods. Wise offers convenient solutions:

  • SEPA Direct Debit: This is an automatic deduction of funds from a customer’s bank account, which is convenient for subscription models or regular payments.
  • Interface localisation: The system is available in German, and invoices and notifications can be sent in German, which increases customer trust.
  • Multi-currency support: Despite working in Germany, many freelancers work with clients from other countries. Wise allows you to invoice in EUR, GBP, USD and many other currencies, which eliminates additional conversions for the client.


4. Accounting for foreign currency transfers

Freelancers working with international clients often face the need for currency conversion. In Germany, it is important to:

  • State the exact amount in the client’s currency and its equivalent in EUR, if required for tax reporting purposes.
  • Use the mid-market exchange rate to avoid extra costs. Wise automatically displays the conversion rate and fee, making the process transparent.


5. Accounting automation

Bookkeeping in Germany can be a complex process, especially for freelancers. Wise offers integration with accounting systems such as DATEV, Xero, and QuickBooks, which allows:

  • Automatically synchronise transactions.
  • Mark paid invoices and track debts.
  • Prepare data for the tax return without the need for manual record-keeping.


6. Integration with German banks

To withdraw funds or make payments to clients, you can link a German bank account to Wise. This guarantees:

  • Fast withdrawal of funds: Funds usually arrive within 1-2 working days.
  • Simple IBAN linking: The platform supports all German banks, which simplifies the setup process.


7. Practical help for freelancers

Wise is actively updating its knowledge base and providing specialist instructions for freelancers in Germany:

  • Invoicing guidelines.
  • Tips for managing multi-currency accounts.
  • Information on tax rules and reporting in Germany.


8. Reporting to the Finanzamt

Wise allows you to prepare all the necessary information for submitting reports to the German tax office (Finanzamt):

  • Download all transactions for the year in a convenient format (CSV or PDF).
  • Specify account identifiers for convenient income sorting.
  • Include currency conversion details if payments are received in different currencies.


Practical tips for using Wise Business

  • Multi-currency accounts: Use them to minimise currency conversion costs.
  • Accounting automation: Integration with Xero and QuickBooks will speed up the financial accounting process.
  • System testing: Before sending the first invoice to the client, test the platform’s functionality.

Annual report

Annual reporting is an important part of a freelancer’s work in Germany. Preparing the accounts involves gathering all financial data for the year, submitting the tax return and complying with statutory deadlines. For freelancers using EÜR (Einnahmenüberschussrechnung) — the simplified system of accounting for income and expenses, proper preparation and submission of reports helps to avoid problems with the tax authority.

1.1. Preparation of the annual report

Preparation of the annual report begins with the systematisation of all financial documents and their correct recording. It is important to gather and process:

  • Revenue: All income received during the year, including invoices you issued to clients and payments received.
  • Expenses: Include office rental, equipment costs, travel, professional training, and any other business-related expenses.
  • Asset depreciation: If you have purchased equipment or vehicles, their cost may be written off over several years.

Various accounting platforms can be used to prepare the annual report, such as Lexoffice, SevDesk or Getsorted. These programs simplify data collection and help organise bookkeeping in a user-friendly format. Such services automatically generate reports, synchronise data with bank accounts and prepare documents for the tax return.

1.2. Completion of the tax return

Filling out the tax return is an important step that must be completed before the established deadline. The main forms for submission:

  • Anlage EÜR – for recording income and expenses;
  • Einkommensteuererklärung – income tax return;
  • Umsatzsteuererklärung - VAT return, if you are registered as a VAT payer;
  • Gewerbesteuererklärung – business tax return (if applicable).

Software for automating the completion of reports:

  • ELSTER: Official portal of the German tax office for filing returns online.
  • Lexoffice: Cloud platform for accounting and tax return preparation that helps automate processes.
  • SevDesk: Provides simple tools for bookkeeping, invoicing and tax filing.
  • Getsorted: Another handy service for freelancers, allowing them to easily manage finances and prepare reports.

These platforms make it easy to integrate income and expense data, automatically generate the necessary documents and can help avoid errors when completing your tax return.

Which forms to submit depending on the status

SituationWhat is usually submittedWhat to look out for
Freiberufler without VAT or KleinunternehmerEinkommensteuererklärung, Anlage S (schedule for freelance income), Anlage EÜRA Kleinunternehmer does not charge VAT on invoices, but still declares income and expenses. In the EÜR, it is important to state the turnover correctly, without Vorsteuerabzug.
Freiberufler with VATEinkommensteuererklärung, Anlage S, Anlage EÜR, Umsatzsteuererklärung, Umsatzsteuer-Voranmeldung if requiredIt is necessary to reconcile the Umsatzsteuer, Vorsteuer, advance VAT returns and actual payments. With B2B EU clients, a Zusammenfassende Meldung may also be required.
Gewerbe without VAT or KleinunternehmerEinkommensteuererklärung, Anlage G (schedule for business income), Anlage EÜR, often GewerbesteuererklärungEven if no Gewerbesteuer actually arises due to the €24,500 Freibetrag, the Finanzamt may still expect a separate Gewerbesteuererklärung.
Gewerbe with VATEinkommensteuererklärung, Anlage G, Anlage EÜR, Umsatzsteuererklärung, Umsatzsteuer-Voranmeldung, GewerbesteuererklärungCheck that invoices, VAT, Vorsteuer and Gewerbesteuer all match up. If turnover or profit has increased, your bookkeeping obligations may change.
A main job plus freelance work, or a Gewerbe registrationEinkommensteuererklärung, Anlage N (schedule for employment income), Anlage S or Anlage G, Anlage EÜRThe tax authorities look at your total annual income: your salary, income from self-employment, insurance payments, children, tax allowances and your family circumstances.
Several types of activityUsually, a separate Anlage EÜR for each business activity or Steuernummer, plus an Anlage S/G depending on the type of incomeDo not lump Freiberufler and Gewerbe activities together without checking first. Sometimes the Finanzamt assigns different tax numbers or asks you to keep separate accounts.

Examples of scenarios

  • IT consultant — Freiberufler, Kleinunternehmer: usually submits the Einkommensteuererklärung, Anlage S and Anlage EÜR. Does not show VAT on invoices.
  • Designer — Freiberufler with VAT: submits the Einkommensteuererklärung, Anlage S, Anlage EÜR and Umsatzsteuererklärung. If any Voranmeldungen were filed, the amounts must match the annual return.
  • An online shop run as a Gewerbe — usually submits the Einkommensteuererklärung, Anlage G, Anlage EÜR, Gewerbesteuererklärung and VAT forms, unless the Kleinunternehmerregelung applies.
  • A full-time job plus a bit of extra work on the side — Anlage N for the salary is added to the standard tax return, whilst freelance or Gewerbe income is reported via Anlage S or G and the EÜR.

Pre-dispatch checklist

  • Check that all customer invoices and all expenses have been included in the EÜR.
  • Reconcile bank receipts with issued invoices, especially if there were refunds, partial payments or payments in another currency.
  • If you are VAT-registered, compare the Umsatzsteuererklärung with the Umsatzsteuer-Voranmeldungen you have filed.
  • Please check whether you need to submit Anlage N if you were in paid employment during the year.
  • Enter your insurance contributions, pension payments, professional expenses and other personal deductions in the relevant sections of your tax return.
  • Keep a copy of the submitted tax return, the ELSTER transmission protocol and all documents for at least the retention period.

1.3. Reporting deadlines

It is important for freelancers to meet reporting deadlines to avoid fines. The main deadlines are as follows:

  • By 31 July of the following year, if you are filing your tax return yourself.
  • By the end of February of the second year after the tax year, if you are working with a tax adviser.

Example: if you are filing your tax return for 2025, the deadline for filing it yourself is 31 July 2026, whereas if you use the services of a tax adviser, the deadline is extended to 1 March 2027, as 28 February 2027 falls on a Sunday.

Meeting these deadlines helps to avoid penalties and issues with the tax authorities, while using specialised accounting platforms simplifies the process of preparing and submitting reports.

Chapter 4. Accounting Software

Freelancers in Germany need to manage their cash flow and tax affairs effectively. Accounting software allows them to automate these processes, which makes their work much easier. Below, we look at seven popular solutions that are ideal for freelancers.

1. Lexoffice

Lexoffice — one of the most popular cloud-based solutions for accounting automation. It is suitable for freelancers and small businesses, offering the ability to integrate with banks and automate tax compliance. It supports the preparation of the annual EÜR and integration with ELSTER and DATEV.

  • Supported banks: Qonto, N26, Commerzbank, ING, Finom, Kontist.
  • Cost: from €7.90 to €32.90 a month (excluding VAT).

Pros:

  • Ease of use.
  • Integration with banking systems.
  • Automatic tax calculation and VAT accounting.

 

2. SevDesk

SevDesk is cloud-based accounting software that helps automate bookkeeping, invoicing and tax reporting. It also integrates with a large number of banks and with DATEV.

  • Supported banks: Sparkasse, Deutsche Bank, Commerzbank, Volksbank, N26, Finom, Kontist.
  • Cost: a free plan or from €8.90 to €34.90 per month (excluding VAT).

Pros:

  • Mobile app.
  • Integration with 3000+ banks.
  • Receipt scanning capability.

 

3. Lexware

Lexware is a desktop solution suitable for freelancers and small businesses. It supports double-entry bookkeeping and payroll calculation, making it ideal for those who work with a large number of transactions.

  • Supported banks: Volksbank, Postbank, Sparkasse, Finom, Kontist.
  • Cost: from €24.40 to €77.90 a month (Lexware buchhaltung, excluding VAT).

Pros:

  • Double-entry book-keeping support.
  • Payroll calculation.

 

4. FastBill

FastBill offers accounting automation for small businesses and freelancers, as well as integration with banking systems and services. With FastBill, you can easily keep track of receipts, create invoices and manage taxes.

  • Supported banks: Deutsche Bank, N26, Postbank, Sparkasse.
  • Cost: from €9 to €53 a month.

Pros:

  • Automation of financial processes.
  • Ease of use.

 

5. Sage 50

Sage 50 is a comprehensive accounting solution that also supports integration with payment systems and online stores. This makes it suitable for both freelancers and small businesses.

  • Supported banks: Commerzbank, PayPal, Stripe.
  • Cost: from €30 to €40 per month.

Pros:

  • Online shop support.
  • Integration with payment systems.

 

6. BuchhaltungsButler

BuchhaltungsButler offers accounting automation and integration with banks and tax reporting systems such as DATEV and ELSTER. The program is suitable for automating routine accounting tasks.

  • Supported banks and systems: DATEV, Sparkasse, Deutsche Bank, Volksbank.
  • Cost: from €39.90 to €89.90 per month (excluding VAT; cheaper if paid annually).

Pros:

  • Support for automatic document scanning and record-keeping.

 

7. WISO Mein Büro

WISO Mein Büro offers both desktop and cloud versions for accounting management. It supports integration with banking systems and payment services.

  • Supported banks: Commerzbank, Sparkasse, Postbank, Finom, Kontist.
  • Cost: from €10.90 to €139.90 a month (excluding VAT, if paid annually).

Pros:

  • Comprehensive reporting capabilities.
  • Integration with ELSTER.

 

Getsorted

Getsorted — another cloud-based solution designed specifically for freelancers and small businesses in Germany. It helps automate bookkeeping and tax reporting, making the process of submitting the annual EÜR tax return easier through integration with ELSTER.

Features:

  • Complete tax automation and return filing.
  • Integration with banking systems and automatic transaction retrieval.
  • Support for EÜR and USt (VAT).

Supported banks: N26, Deutsche Bank, Commerzbank, Sparkasse, Finom, Kontist.

Cost: from 8 € per month.

 

8. Accountable

Accountable is a cloud-based accounting application specifically designed for freelancers and the self-employed in Germany. It helps automate income and expense tracking, create invoices, submit tax returns, and integrates with German tax standards.

  • Supported banks: N26, Commerzbank, Deutsche Bank, Sparkasse and others.
  • Cost: Free basic plan or from €9.90 to €74.90 per month for premium features (excluding VAT).


Pros:

  • Convenient mobile app.
  • Simple integration with bank accounts.
  • Automatic completion of tax returns.
  • Tax deadline reminders.

Chapter 5. Banks

Review of popular online banks for freelancers in Germany

Choosing the right online bank for a freelancer is an important step towards effective financial management. The article reviews the main banks that offer flexible tariffs, convenient internet banking, integration with accounting software, and other useful features. We have also included a detailed table to compare key parameters.

1. Kontist

Kontist is a bank specifically designed for freelancers. It offers automatic tax calculation and integration with popular accounting software, which significantly simplifies financial reporting and tax management.

Functions:

  • Automatic calculation of tax and VAT.
  • Free virtual Visa card, physical card for €29/year.
  • Integration with Lexoffice, Debitoor, Fastbill — you can easily manage expenses and income.

Features:

  • No cashback.
  • Video identification.
  • Google Pay / Apple Pay for mobile payments.

 

2. N26 Business

N26 is one of the largest mobile banks in Europe, offering competitive rates for international transfers and built-in cashback on purchases. It supports integration with external accounting services.

Functions:

  • Free basic tariff with unlimited SEPA transactions.
  • Connecting to Accountable for automating accounting.
  • Cashback ranging from 0.1% to 0.5%.

Features:

  • Support for mobile payments via Google/Apple Pay.
  • Video identification for account opening.
  • Connecting to external services via API.

 

3. Qonto

Qonto provides various pricing plans and advanced features for small businesses, including the ability to connect multiple users. This is an ideal choice for freelancers who want accounting integration and to manage their invoices.

Functions:

  • Integration with Lexoffice, DATEV, SevDesk for automating financial accounting.
  • Ability to use multiple cards and sub-accounts.

Features:

  • Google Pay / Apple Pay for mobile payments.
  • Video identification.
  • API integration capability for process automation.

 

4. Finom

Finom offers a flexible billing system and integration with accounting systems, making it attractive for freelancers working with numerous clients.

Functions:

  • Receipt management and invoicing tools.
  • Integration with Lexoffice and SevDesk.

Features:

  • Cashback of up to 3% on premium plans.
  • Mobile payments via Google Pay and Apple Pay.
  • Video identification and API support for automation.

 

5. Fyrst

Fyrst — a German digital bank that supports accounting software and offers free cash withdrawals at ATMs in Germany. Its main advantage is convenience and integration with financial systems such as Lexoffice and SevDesk.

Functions:

  • Integration with Lexoffice, SevDesk, Sage.
  • Free business VISA card.

Features:

  • German language only.
  • Google/Apple Pay support.
  • Free cash withdrawals at ATMs throughout Germany.

 

6. Vivid

Vivid is another interesting choice for freelancers. It offers high cashback and free maintenance for basic users. It is suitable for those who want to use multiple additional cards and sub-accounts.

Functions:

  • Up to 25% cashback on selected shopping categories.
  • Free cash withdrawals of up to €200 per month.

Features:

  • Google Pay/Apple Pay.
  • Video identification.
  • API for integration with external services.

On banks and money

Chapter 6. Insurances

Freelancers in Germany, like other self-employed persons, must take into account several important types of insurance in order to protect themselves and their business against potential risks. Insurance policies can be either compulsory or recommended, depending on the nature of the activity.

1. Health and long-term care insurance (Krankenversicherung + Pflegeversicherung)

In Germany, every freelancer is required to have health insurance. You can choose between statutory health insurance (gesetzliche Krankenversicherung) and private health insurance (private Krankenversicherung). In 2026, the GKV contribution for the self-employed is 14.6% of assessable income with entitlement to Krankengeld (sickness benefit), or 14.0% without it, plus the individual Zusatzbeitrag (additional contribution) set by your Krankenkasse; the average Zusatzbeitrag for 2026 is 2.9%. Long-term care insurance (Pflegeversicherung) is paid for separately: the basic rate is 3.6%, and for childless individuals aged 23 or over, it is 4.2%. However, under the statutory system, family members can be insured free of charge, which is not available under private schemes.

Cost: 250 – 1,000 € a month, depending on the chosen option.

2. Accident insurance (Unfallversicherung)

This insurance is compulsory for freelancers only in certain sectors: by law or under the statutes of their Berufsgenossenschaft (the statutory accident insurance body for their sector). In other cases, insurance is voluntary, but highly recommended. Insurance covers rehabilitation costs and compensation for losses resulting from accidents at work.

Cost: €5 – €20 a month.

3. Pension insurance (Altersvorsorge)

Pension insurance is compulsory only for certain professions, such as journalists and teachers; for doctors it is also compulsory, but through the berufsständisches Versorgungswerk (professional pension scheme) rather than the state system. For other freelancers, participation in the state pension system is voluntary. It is important to start saving for retirement as early as possible, since without their own contributions, the state only guarantees freelancers Grundsicherung im Alter (basic income support in old age) — a minimum benefit for those without sufficient income.

Cost: if you pay voluntarily into the gesetzliche Rentenversicherung (statutory pension insurance), contributions in 2026 range from the minimum voluntary contribution of approximately 112 € a month to the maximum contribution of approximately 1 572 € a month. For some self-employed professions, pension insurance can be compulsory, and then the calculation rules are different.

4. Income protection insurance (Berufsunfähigkeitsversicherung)

This is one of the most important types of insurance for freelancers, as it protects you against financial loss should you be unable to work due to illness or an accident. The insurance covers lost income and helps you avoid serious financial difficulties.

Cost: €60 – €200 a month.

5. Professional Indemnity Insurance (Berufshaftpflichtversicherung)

This insurance is essential for freelancers, especially those involved in consultancy or project work. It protects against risks associated with professional errors that could lead to financial losses for clients. For example, if you provide incorrect advice or infringe copyright, this insurance will pay the client’s justified claims for damages and defend you against unjustified ones, including legal costs. It does not cover fines.

Cost: €10 – €50 a month.

6. Public liability insurance for businesses (Betriebshaftpflichtversicherung)

This insurance protects you in the event that someone suffers loss or damage (physical or material) at your workplace or as a result of your business activities. For example, if a client slips in your office or you accidentally damage their property, the insurance will cover the costs of medical treatment and repairs.

Cost: €8 – €25 a month.

7. Legal expenses insurance (Rechtsschutzversicherung für Selbstständige)

This insurance is important if you need to protect your interests in court, especially in the case of disputes with clients who refuse to pay their invoices. The insurance covers legal expenses, including lawyers’ fees and court costs.

Cost: €25 – €50 a month.

8. Business contents insurance (Geschäftsinhaltsversicherung)

This insurance protects your business property, such as office equipment or machinery, from theft, fire or other damage. It is particularly relevant for those freelancers who have their own office premises.

Cost: €5 – €10 a month.

Insurance for foreign nationals

If you have arrived in Germany on a visa or are just changing your residence status, insurance becomes not only a financial matter, but also a part of your legal stay. For a visa and the extension of an Aufenthaltstitel (residence title), it is usually necessary to show valid health insurance in Germany. It is important to check in advance whether the Ausländerbehörde accepts your type of insurance: travel insurance is often only suitable for entry or a short period, but does not replace full Krankenversicherung for living and working.

In practice, this means: before submitting your documents, check the requirements with your local immigration office (Ausländerbehörde), keep proof of cover, check the start date of the insurance, and make sure the policy covers the period until you receive or renew your residence permit. For a general overview of the health insurance system, you can use the official guide from the Federal Ministry of Health (Bundesministerium für Gesundheit).

Conclusion

It is important for freelancers to choose the right insurance programmes to help protect their business and ensure financial stability. Some types of insurance are compulsory, such as health and nursing care insurance, while others (for example, professional indemnity) are strongly recommended to provide protection against unforeseen risks.

On insurance for the self-employed

The links lead to our separate analyses. The conditions and amounts there are checked against original sources and updated — unlike the figures within the guide, which relate to the date it was written.

Chapter 7. Work

Calculating your value on the labour market

Accurate calculation of the hourly rate is a key factor in running a successful business. It is important to take into account all your expenses, income and factors that may affect your work and earnings. In this chapter, we will look at how to calculate your rate using the provided data and calculator spreadsheet. We will also add information on average rates by industry and the inclusion of various expenses, such as taxes, holidays, sick leave and other unforeseen costs.

Step 1: Determine your desired income

The first step is to determine how much you want to earn monthly or annually. In our example, the freelancer has set:

  • Monthly income: €5,750
  • Annual income: 69,000 euros

This is your starting point. However, it is important to remember that this is not your take-home pay — this amount includes all your future taxes, social security contributions and other mandatory payments.

Step 2: Take the number of working hours into account

Next, you should calculate how many hours a month you plan to work. This can be done by determining the number of working days in a year. In our example:

  • Working days in a year: 261 days
  • Days off: 45 days (including holidays, annual leave, training days and sickness absence)

It is important to bear in mind that not all of your time will be paid for by clients. On average, freelancers spend around 30% of their time on non-productive tasks, such as client acquisition, bookkeeping, training and other administrative tasks. Therefore:

Unpaid time: 30%

Step 3: Calculate the number of paid hours

To get the number of paid hours per month, it is necessary to take the aforementioned parameters into account. In our example:

  • Total number of working hours per year: 261 days × 8 hours = 2’088 hours
  • Unpaid time (30%): 2088 × 30% = 626.4 hours
  • Paid time per year: 2088 — 626.4 = 1461.6 hours per year or 121.8 hours per month.

 

Therefore, we have a guideline: you will work 121.8 paid hours a month.

Step 4: Calculate the hourly rate

You can now calculate the minimum hourly rate. To do this, you need to divide your desired income by the number of paid hours:

  • Monthly income: €5,750
  • Paid hours per month: 121.8 hours

Hourly rate = 5750 / 121.8 = €47.20

This is the minimum rate you need to charge for each hour of work to reach your target income. However, in practice this rate can be increased, taking into account the following factors:

  1. Unforeseen expenses: There are cases when more time is required for a project or unexpected costs arise, such as price increases for tools or services.
  2. Market competition: If you operate in a highly competitive niche, your rate may need adjusting in line with average market rates.

Step 5: Take social security contributions and taxes into account

In Germany, freelancers are required to pay their own social security contributions, such as health insurance and pension contributions. The following rates are used in our example:

  • Health insurance (including cover for incapacity to work): 14,6%
  • Pension contributions: 18,6%

These percentages must be included in your total income. Together with the Zusatzbeitrag and Pflegeversicherung, they come to around 40% of earnings, and around 20% without voluntary pension contributions. Let’s take 20%: then the minimum rate has to be divided by 0.8, i.e. increased by 25% rather than 20%, because contributions are also charged on the increase itself:

  • 47.20 euros / 0.8 = €59.00

This is a new rate that takes into account your social security contributions.

Step 6: Take into account a freelancer’s main expenses

To avoid making a loss, it is important to take all your expenses into account when calculating your rate. Here are the main categories you should include:

  1. Office and operating expenses:
    • Renting a workspace or an office (if you don’t work from home)
    • Purchase of equipment (computers, software)
    • Internet, telephone and postal service costs
    • Equipment and software maintenance
  2. Advertising and marketing:
    • Website creation and maintenance
    • Social media marketing
    • Payment for advertising platform services
  3. Transport costs:
    • Business trips and travel to client meetings
    • Depreciation and maintenance of a car (if used for work)
  4. Training and development:
    • Continuing professional development courses
    • Purchasing literature, attending conferences
  5. Administrative expenses:
    • Accountancy services
    • Remuneration of tax advisers
    • Costs of record-keeping and bookkeeping
  6. Insurance:
    • Health insurance (compulsory)
    • Accident insurance
    • Third-party liability insurance
  7. Reserve funds:
    • Unforeseen expenses (equipment repairs, legal services)
    • A contingency fund in case of a lack of orders or illness

Step 7: Factoring in weekends, sick leave and holidays

When calculating your rate, it is important to take into account the time when you are not working. Unlike employees, freelancers are not paid for sick leave or days off. Include these periods in your calculations:

  1. Public holidays: In Germany, the number of public holidays can vary depending on the federal state. Usually there are about 13 days a year.
  2. Holiday: Even though freelancers often cannot afford many days off, it is recommended to include at least 25 days holiday a year in your calculations.
  3. Sick leave: Statistically, people in Germany are off sick for about 10–15 days a year.
  4. Training time: On average, freelancers spend 5-10 days a year on professional development.

Example of final calculation

Let’s assume that a freelancer wants to earn €69,000 a year and works 1’462 hours a year, taking into account all downtime. They calculate their minimum rate by adding social security contributions:

  1. Basic hourly rate: €47.20
  2. Rate including social security contributions: €59.00

 

Therefore, to achieve the desired income, a freelancer should aim for an hourly rate of at least 59 euros.

Step 8: Consider industry market rates

It is very important to understand that the size of the hourly rate also depends on your specialisation and industry. In Germany there is a wide range of hourly rates, which varies depending on the specifics of the work. According to data from Freelancermap, here are some examples of average rates across various sectors:

  • SAP consultants: 99 euros an hour
  • Consulting and management: 93 euros an hour
  • IT development: 91 euros an hour
  • Engineering services: 87 euros an hour
  • Media 69 euros an hour

These figures represent the industry average, and your hourly rate should be comparable to that of your competitors in your sector. For example, if you are an IT specialist working on software development, a rate in the range of 90 to 100 euros would be reasonable.

Conclusion

A freelancer’s hourly rate in Germany depends on a multitude of factors, such as working hours, non-productive time, taxes and social security contributions, as well as the market situation. Using the calculator and the provided data, you can accurately calculate your rate to cover all expenses and earn your desired amount. Do not forget to regularly review your calculations, taking into account changes in expenses and market demands.

This calculation will help you manage your finances effectively and ensure that you are receiving fair payment for your services, whilst remaining competitive within your sector.

Where and how to find work (Kundenakquise für Freelancer)?

One of the main challenges for a freelancer, particularly when starting out, is finding clients. The ability to attract clients effectively determines the success and stability of your work. It is important to understand that your client base needs to be constantly expanding, and relying on just one source of projects is risky. In this article, we’ll look at strategies to help freelancers attract new clients, as well as discuss the best platforms for finding projects.

What is customer acquisition?

Customer acquisition, or “Kundenakquise”, is the process of seeking out and winning new customers. It involves various activities aimed at identifying potential customers, engaging with them and securing contracts. However, success in customer acquisition is based on understanding the customer’s needs and the ability to offer a solution that addresses their problems and meets their expectations.

Client acquisition channels

There are several main forms of “Kundenakquise”, each of which has its own advantages:

  1. Cold calling (“Kaltakquise”) — a direct approach to potential customers with whom there is no existing relationship. Such contact usually takes place via telephone calls, emails or social media. Cold calling requires persistence and preparation, as not all companies are prepared for unsolicited approaches.
  2. Warm leads (“Warmakquise”) — In this case, the client is already familiar with the freelancer or their services. This may be through referrals, former clients or previous business connections. This approach is simpler and more effective, as there is already a relationship of trust between the parties.

Referral marketing (“Empfehlungsmarketing”) — this involves attracting new customers through recommendations from satisfied clients. This method is effective if you already have clients who can recommend your services to their colleagues or business partners.

Active and passive client acquisition methods

When searching for clients, you can use two main approaches: active and passive.

Active methods:

  • Participation in conferences and industry events.
  • Direct outreach to companies via email or phone.
  • Using freelance platforms to find projects.
  • Building a personal brand through social media and publications.

 

Passive methods:

  • SEO optimisation of your own website or portfolio.
  • Blogging or publishing articles that can attract the attention of potential clients.
  • Profile on platforms with the option to search for freelancers.
  • Publishing positive reviews and case studies to attract new clients.

Steps to successful customer acquisition

  1. Define your target audience
    To find clients, you need to know who they are. Conduct an analysis of potential clients: their age, profession, interests, industry. Create buyer personas — these are fictional profiles of typical clients that will help tailor your offer.
  2. Find your niche and unique selling proposition (USP)
    How do you differ from your competitors? It is important to highlight your unique strengths: this could be specialised experience, unique skills or specific working methods. Defining your USP helps not only to stand out from competitors, but also to properly choose channels for acquiring customers.
  3. Choose the right channels to attract customers
    Where does your audience spend their time? If your clients are young start-ups, they are likely to be on social media. If you work with large companies, more attention should be paid to business platforms like LinkedIn or Xing.
  4. Keep searching continuously
    Do not wait for a lull in projects to start looking for new clients. This should be an ongoing part of your work, even when you have current projects.
  5. Build long-term relationships
    After completing the project, keep in touch with the client. Regular emails, holiday greetings or simply paying attention to company news can make you the “default freelancer” for future tasks.

Top 5 platforms for finding clients in Germany

In Germany, there are numerous specialised platforms for finding projects. Here are the five most popular among freelancers:

  1. Freelancermap.de
    A German platform that specialises in IT, software development and digital marketing projects. It provides access to a large number of freelance vacancies.
  2. Xing Projekte
    Xing is the German equivalent of LinkedIn, and it offers a special section for finding projects and freelancers. It is a great platform for those looking for clients among German-speaking companies.
  3. Gulp.de
    Gulp is one of the largest platforms for finding IT freelancers in Germany. It offers projects for both short-term and long-term work in areas such as software development and IT consulting.
  4. Twago.de
    Twago is aimed at freelancers in various fields, from marketing to software development. The platform allows you to contact clients directly and apply for projects of interest.
  5. DasAuge.de
    The DasAuge platform is popular among designers, graphic artists and advertising professionals. It provides access to creative projects for freelancers working in Germany.

TOP 5 international platforms for finding clients

Globally, there are also platforms that allow freelancers to find work in different countries:

  1. Upwork
    One of the largest freelance platforms in the world, offering projects in a wide variety of fields, from IT to translation and design. Upwork provides freelancers with the opportunity to find both short-term and long-term projects.
  2. Freelancer.com
    An international platform where you can find projects in development, design, marketing and other fields. Freelancer.com is popular due to its huge number of users and projects.
  3. Fiverr
    Fiverr offers freelancers the opportunity to sell their services, starting with small tasks for 5 dollars. This is a great platform for those who want to quickly find short-term tasks and build a portfolio.
  4. Toptal
    Platform for experienced IT and software development freelancers. Toptal works with the world’s leading companies, and the selection process for the platform is more rigorous than on other sites.
  5. PeoplePerHour
    A platform that connects freelancers and clients around the world. Projects on PeoplePerHour cover a wide range of services, from web design to digital marketing.

Conclusion

Client acquisition for a freelancer is an ongoing process that requires strategy, perseverance and the use of the right tools. It is important to be able to combine active and passive methods, regularly look for projects and maintain communication with clients. Using specialised platforms in combination with a well-thought-out personal brand and networking will help freelancers successfully develop their business and find new clients both in Germany and worldwide.

Job loss and state support

In Germany, there are support programmes for those who want to start freelancing while on unemployment benefits, as well as for those who are already working as freelancers but have lost clients and found themselves in a difficult situation.

1. Starting freelancing on unemployment benefit (Arbeitslosengeld I)

If you are on unemployment benefit (ALG I) and are planning to become a freelancer, you may be eligible for the Gründungszuschuss (the business start-up grant). This grant consists of two stages:

  • Stage 1: During the first 6 months you receive an amount equal to your last unemployment benefit, plus an additional €300 per month for social security.
  • Stage 2: If you demonstrate successful business growth, you can receive an extra €300 a month for the next 9 months. Source: IHK

 

Requirements for receiving the Gründungszuschuss:

  • Remaining entitlement to ALG I: A minimum of 150 days of remaining entitlement to the benefit.
  • Business plan: It is necessary to submit a detailed business plan, including financial forecasts and a description of the concept, which must be approved by an expert body, such as the IHK (Chamber of Commerce and Industry).
  • Proof of viability: You must convince the employment agency of your competence and the viability of your business idea.

Additional expenses:

  • IHK fee: For example, at IHK Berlin, the fee for assessing a business plan is €50 plus VAT.
  • Initial investment: It is necessary to submit a capital expenditure plan, financing details and a detailed breakdown of personal expenses.

 

2. Moving on to Grundsicherungsgeld (basic income support)

If you were a freelancer and lost clients, which led to financial difficulties, you can apply for Grundsicherungsgeld — the name the basic benefit has carried since 1 July 2026. From 1 January 2023 it was called Bürgergeld, which replaced Arbeitslosengeld II (Hartz IV). It provides a minimum income and covers housing costs.

Einstiegsgeld for freelancers on Grundsicherungsgeld:

  • Einstiegsgeld: If you want to become a freelancer again while on Grundsicherungsgeld, you can apply for this subsidy. It is meant to encourage a move into self-employment and is granted for a fixed period. The amount is set by your case manager at the Jobcenter based on your situation. Source: IHK
  • Business viability: As is the case with the Gründungszuschuss, you need to prove the viability of your idea and your ability to run a business.

 

Voluntary unemployment insurance for freelancers

Freelancers can insure themselves against unemployment through the Freiwillige Arbeitslosenversicherung (voluntary unemployment insurance). To apply for insurance, you must submit an application within 3 months of starting your activity. Contributions are fixed and do not depend on your income. The insurance provides the right to receive unemployment benefit if certain conditions are met:

  • Criteria: The activity must be carried out for at least 15 hours a week.
  • Rights: When unemployment occurs, freelancers who participate in the insurance are entitled to receive Arbeitslosengeld.

 

Main aspects of voluntary insurance:

  • Timescales: You must apply within 3 months of starting work independently.
  • Contributions: Contributions are fixed, but they may be reduced by 50% for new entrepreneurs or parents on maternity leave.
  • Allowance: You are entitled to the benefit if, in the last 30 months, you were insured against unemployment for at least 12 months — as an employee or voluntarily. The amount is based on your previous salary only if, in the two years before becoming unemployed, you had at least 150 days of paid employment; otherwise, a notional salary (fiktives Arbeitsentgelt) based on your qualifications is used. 

 

How do I apply?

Therefore, Germany provides several opportunities to support freelancers during the transitional period, whether starting a new business or overcoming temporary financial difficulties.

Types of freelance contracts

When concluding a contract between a client and a freelancer, it is important to choose the right type depending on the nature of the project, goals and expectations of both parties. The contract is the main document that records the terms of cooperation and regulates the rights and obligations of the parties. Let us look at the main types of contracts for freelancers:

1. Service contract (Dienstvertrag)

A Dienstvertrag, or a service provision agreement, obliges the freelancer to provide services without a guarantee of a specific result. The main focus in this case is placed on the provision of the service itself, rather than on the final result, which is what matters in a Werkvertrag, or contract for work. The client pays the freelancer for work carried out within the agreed terms, even if this work does not bring the desired result.

Features of a Dienstvertrag:

  • The freelancer accepts no liability for the final result of the work, only for the performance of their duties under the contract.
  • The work must be carried out in accordance with the client’s instructions, without significant flaws, for the freelancer’s obligations to be considered fulfilled.
  • A freelancer receives a fixed fee for work done that does not depend on the final success of the project.

Examples of where a Dienstvertrag is used:

  • IT services: support and maintenance of the company’s IT infrastructure, where the freelancer is responsible for the day-to-day management of the systems, but not for their ultimate success.
  • Online marketing: continuous support for the company’s marketing campaigns, where the process of service delivery is key rather than the end result.
  • Consultancy services: advising clients on a range of issues, with the main focus on providing knowledge and guidance rather than on the end result.

Advantages of a Dienstvertrag:

  • Flexibility: the contract allows the client to receive services on an ongoing basis without being tied to specific outcomes.
  • Protection: The freelancer is protected against claims relating to the final results of the project, provided that the work has been carried out properly.

Consequently, the Dienstvertrag is the best choice for projects where it is not the end goal that matters, but rather the service delivery process, and both parties are provided with clear terms of cooperation.

2. Contract for work (Werkvertrag)

Unlike a service agreement, a works contract entails an obligation to achieve a specific result. The main focus is on the successful completion of the project. Payment is made for the final product or service, rather than the work process.

Example: Under a contract for work, a graphic designer undertakes not only to design the website layout, but also to deliver a finished, fully functional website in accordance with the client’s requirements.

3. Fee agreement (Honorarvertrag)

This contract is used to set out the terms of payment for specific services provided by a freelancer. The contract specifies the scope of work, deadlines, the fee and the terms of payment.

Example: If a graphic designer enters into a fee agreement for the creation of a logo, the agreement will specify the design, the deadline for its delivery, the fee and the payment terms.

4. Consultancy Agreement (Beratervertrag)

This contract is suitable for freelancers providing consultancy services. It sets out the terms and conditions governing the consultancy services, their scope, cost and the terms of the working relationship.

Example: If a company requires consultancy on redesigning its brand, it enters into a consultancy agreement with a designer, setting out the objectives of the consultancy, the timing of meetings and the fee.

5. Non-Disclosure Agreement (NDA - Geheimhaltungsvereinbarung)

An NDA protects confidential information exchanged between the client and the freelancer. This agreement is important when a project requires the protection of intellectual property, ideas or trade secrets.

Example: When a graphic designer discusses a new product with a client, an NDA protects the designer’s ideas from being used or disclosed without their permission.

6. Termination of the contract (Kündigung)

A contract may be terminated at the initiative of one of the parties. This requires formal notice to be given to the other party, in accordance with the agreed timeframes and conditions for termination.

Example: A graphic designer may terminate the contract if the project proves to be unfeasible, provided that all notice periods specified in the contract are observed.

7. Digital employment contracts: what do you need to know? (updated 2025)

The Bureaucracy Reduction Act (Bürokratieentlastungsgesetz) allows for the use of digital employment contracts, which significantly simplifies the paperwork process. Employers can provide information on the key terms of the contract via email or specialised e-signature services, such as DocuSign. In most cases, compliance with the written form requirement and the presence of a qualified electronic signature are not required. Instead, text form is acceptable: it must state the name of the person making the declaration but does not require a handwritten signature.

What requirements must be met? The document must be accessible to the employee so that they can open, save and print it, and the employer must request confirmation of receipt of the document.

Exceptions to the rule regarding text format: contracts in sectors with an elevated risk of illegal employment and the majority of fixed-term employment contracts (befristete Arbeitsverträge) continue to require the written form with a personal signature on a physical medium.

How to choose the right contract?

Choosing the right type of contract depends on the project’s objectives, the scope of work and the expectations of both parties. For example, if the main requirement is the provision of a service without a guarantee of results, a service contract would be the most suitable option. For projects where achieving a specific result is important, on the other hand, a contract for work would be the best choice.

Mixed contract forms, such as the combination of service provision and works contracts, are also possible if the requirements are clearly defined. Such an approach can be beneficial for both the freelancer and the client.

The right choice of contract plays a key role in the successful completion of a project and ensures transparency in the relationship between the freelancer and the client.

Contract templates:

Template 1
Template 2
Template 3

Termination of contract and letter template

Contract termination for a freelancer is a process that requires special attention to a number of aspects. When the time comes to end cooperation with a client, it is important to properly execute the “Kündigung” (termination), complying with all contract and legal requirements. Let us look at how a freelancer can approach the issue of contract termination correctly.

Key points when terminating a contract

  1. Written form
    The “Kündigung” must be made in writing (“schriftlich”) and on paper for legal protection. Even if the law does not stipulate a mandatory written form, it is important for freelancers to insist on this condition in their contracts. Oral or electronic notifications (e.g. by email) can cause difficulties in confirming the fact of termination, the date and the reason.
  2. Customer confirmation
    Obtaining written confirmation (“Bestätigung”) from the client is advisable, although by law they are not obliged to do so. This can serve as an additional safeguard.
  3. Wording in the document
    It is not necessary to use the word “Kündigung” in the letter, but the text must make it clear that the aim is to end the business relationship and that the freelancer will no longer be providing services.
  4. Reason for termination
    Stating the reason (“Kündigungsgrund”) is only required in the case of termination with immediate effect (“außerordentliche Kündigung”) for a valid reason. For ordinary (“ordentliche Kündigung”) contract termination, providing an explanation of reasons is not mandatory.

Withdrawal of cancellation
A “Kündigung” that has already been received cannot be withdrawn without the other party’s consent: it is a unilateral declaration that takes effect on receipt and does not require the recipient’s consent. If both parties wish to continue the cooperation, a new contract will need to be concluded.

What is a termination letter?

A termination letter (“Kündigungsschreiben”) is a document that unilaterally terminates a contract. It means that one party notifies the other of the end of the cooperation without requiring consent. In cases where the parties reach an agreement, they can sign an “Aufhebungsvertrag” (termination agreement).

Terms of termination

As a rule, freelancers enter into a “Dienstvertrag” (service agreement) or a “Werkvertrag” (works contract), which clearly set out the conditions and termination periods. It is important to carefully examine the contract before signing it to ensure that all clauses and deadlines are acceptable.

Types of termination and timeframes

  1. Ordinary termination (“ordentliche Kündigung”)
    Ordinary termination allows a contract to be terminated at previously agreed times. If the contract contains no special conditions regarding deadlines, the provisions of §§ 620 and 621 of the German Civil Code (BGB) apply.
  2. Early termination for a valid reason (“außerordentliche Kündigung”)
    If one of the parties breaches its obligations or other important reasons arise, either party may terminate the contract immediately. For example, failure by the client to fulfil obligations or a serious breach of contract terms may constitute grounds for early termination.

Examples of grounds for termination

  1. Payment delays
    If the client does not pay the remuneration on time, this can be grounds for early termination. First, the freelancer must send a written warning (“Mahnung”) specifying a deadline to remedy the breach.
  2. Breach of contract
    Any serious breach of contract, such as a breach of confidentiality obligations (“Geheimhaltungsvereinbarung”), may also serve as grounds for termination.
  3. Crimes
    Suspicions of a criminal offence (“Straftat”) by one of the parties may constitute grounds for the immediate termination of the contract.

Conclusion

Every contract termination is unique, and it is important to carefully examine the terms of the agreement before signing. If any doubts arise, it is better for the freelancer to consult a lawyer in order to protect their rights and avoid potential financial consequences.

Bogus self-employment (Scheinselbstständigkeit)

How to avoid sham self-employment in Germany – current legislation

Bogus self-employment — this is a question that causes anxiety for freelancers and their clients in Germany. The rules on bogus self-employment (§ 7 and § 7a SGB IV) are designed to protect workers and prevent situations where freelancers de facto work as employees, but without the corresponding social security benefits. It is important to understand how to distinguish genuine self-employment from bogus self-employment and what needs to be done to avoid problems.

What is bogus self-employment (Scheinselbstständigkeit)?

Bogus self-employment is a situation where a person is registered as self-employed (Freiberufler), but in reality works under conditions similar to those of an employee, for example, having fixed working hours, holiday entitlement and performing tasks under the direction of the employer. In such cases, they fall under the obligations stipulated for employees, including social security contributions.

How to spot bogus self-employment?

Signs of bogus self-employment may include:

  • Fixed working hours (festgelegte Arbeitszeiten)
  • Right to holiday (Urlaubsanspruch)
  • Integration into company processes (feste Prozessintegration)
  • Reporting obligation (Berichtspflichten)
  • Working under the client’s instructions (Tätigkeit nach Weisung)

 

Other factors that may indicate bogus self-employment:

  • More than 80% of revenue comes from a single customer
  • Absence of a personal website or other signs of running a business
  • Participation in training events organised by the client
  • The income is comparable to the salary of an employee or lower

Criteria for self-employment (Selbstständigkeit)

German federal courts have defined several criteria that help to determine genuine self-employment:

  • The work is carried out in one’s own name and on one’s own account (im eigenen Namen und auf eigene Rechnung).
  • Independent pricing and contracting (eigenständige Preiskalkulation).
  • Free scheduling of working hours and no holiday entitlement (Freie Gestaltung von Arbeitszeit und Arbeitsorganisation).

 

The more of these criteria a freelancer’s activity meets, the higher the probability that they are considered a genuine self-employed person.

Who is at risk of bogus self-employment?

Freelancers working in the following fields may be involved in bogus self-employment:

  • IT consultants (IT-Berater)
  • Programmers (Programmierer)
  • Graphic designers (Grafiker)

Who checks for bogus self-employment?

The main auditing authority is the German Pension Insurance (Deutsche Rentenversicherung), which can initiate a so-called Statusfeststellungsverfahren — the employment status determination procedure.

How to avoid accusations of sham self-employment?

Freelancers can reduce the risk of such accusations by using carefully drafted contracts and a clear delineation of responsibilities. There are several types of contracts, such as the Werkvertrag (works contract), which can help structure cooperation correctly.

The consequences of bogus self-employment

If sham self-employment is established, the consequences can be serious for both the freelancer and the client. For example, the client will be required to pay social security contributions (along with all interest and fines) for the past four years, and in the case of intentional violation, for 30 years.

Here are a few recommendations on how to avoid sham self-employment:

1. Drafting well-written contracts

One of the most important steps for a freelancer is having properly drafted and legally vetted contracts. There are several types of agreements that can help structure the relationship with a client:

  • Contract for work (Werkvertrag) — implies the performance of specific work with payment upon completion and acceptance of the result.

  • Service contract (Dienstvertrag) — implies the performance of work on a regular basis, but the freelancer is not an employee of the company.

It is important that the contract clearly reflects that the freelancer bears business risks and works independently.

2. Working with multiple clients

One of the key indicators of bogus self-employment is receiving more than 80% of your income from a single client. To avoid this, it is advisable to work with several clients, even if your main project takes up most of your time. This demonstrates that you are carrying out independent business activities.

3. Demonstration of the business’s external appearance

A freelancer must actively behave as an independent business owner, which may include:

  • Creating your own website or portfolio (Webseite),

  • Having business cards (Visitenkarten),

  • Active promotion of one’s services,

  • Own customer base.

All this shows that the freelancer is engaged in independent entrepreneurial activity.

4. Freedom to choose working hours and location

A freelancer must be able to independently determine their working hours and place of work. If fixed working hours or a workplace are specified in the contract or in practice, this may raise suspicions. For example, working in the client’s office may indicate integration into the company.

5. Use of own work equipment

Genuine freelancers work using their own tools and equipment (computers, software, etc.). If the client provides work equipment, such as a laptop, access to software or materials, this may indicate dependency.

6. Lack of holiday and sick pay

Freelancers should not have the right to paid leave or sick pay. Such rights are typical of employees, and having them may indicate bogus self-employment. For genuine freelancers, breaks in work should be unpaid and planned independently.

7. Conclusion of long-term contracts with a clear specification of the scope of work

If a freelancer works with a client on an ongoing basis, it is better to draw up long-term contracts that clearly outline the scope of work and the conditions for its execution. At the same time, it is important that the work is project-based and evaluated by results rather than by the time spent on tasks.

8. Engaging external specialists

Another indicator of self-employment can be the ability to engage other specialists or subcontractors to perform part of the work. This shows that the freelancer is acting as an entrepreneur rather than a company employee.

9. Use of the risk insurance system

Freelancers often insure themselves against professional risks (for example, work errors), which also underlines their entrepreneurial status. Having insurance helps to avoid accusations of bogus self-employment.

10. Carrying out the employment status determination procedure (Statusfeststellungsverfahren)

If there are doubts about the freelancer’s status, one can apply to the German Pension Insurance (Deutsche Rentenversicherung) to carry out a status determination procedure (Statusfeststellungsverfahren). This allows freelancers and their clients to ensure in advance that the status is correct.

11. Opting out of corporate training programmes

If a freelancer participates in training sessions and courses organised by the client, this may indicate close integration into their business activities. To avoid accusations of bogus self-employment, it is better to decline such events or attend them on general terms as a guest specialist.

Additional measures:

  • Written confirmation of independence. The contract can include terms confirming the freelancer’s independence, for instance, that they work to their own schedule and are responsible for the final result.
  • Regular reporting. Reports must be linked to the completion of specific tasks or project stages, rather than the number of hours worked.

Following these recommendations helps freelancers in Germany minimise risks and avoid situations in which their activity could be classified as bogus self-employment.

Conclusion

Understanding the differences between genuine and bogus self-employment is crucial for freelancers in Germany. Following the rules, drafting contracts clearly and meeting the criteria for self-employment will help avoid unpleasant consequences.

Chapter 8. Side hustle as a self-employed person

In Germany, side-hustling as a self-employed person or freelancer is becoming a popular option for those who want to earn extra income. Unlike traditional employment, self-employment allows a person to work for themselves, but requires legal and tax aspects to be taken into account. In this article, we will look at how to become self-employed in Germany, what steps need to be taken, and what taxes and restrictions should be considered in the case of a side job.

1. What is side hustling as self-employed?

Side-hustling as a self-employed person (Nebentätigkeit als Freiberufler) is work that you carry out on the basis of contracts with clients rather than under an employment contract with an employer. In doing so, you are fully responsible for organising your work, acquiring clients, paying taxes and making insurance contributions.

2. Does freelance work suit you as a side job?

Before starting freelancing, it is important to assess your capabilities and the compatibility of this activity with your main occupation. Freelancing as a side hustle is suitable for someone who:

  • Has the time and willingness to work extra hours outside of main working hours.
  • Is able to manage their time and organise tasks effectively.
  • Wants to develop additional skills or work on interesting projects.

Freelancing can be either a continuation of your main professional activity or a completely different direction.

3. Registration as self-employed

To work legally as a self-employed person in Germany, you need to register your activity. The registration process depends on the nature of the work.

  • Liberal professions, or Freie Berufe (see Chapter 1): If you work as a freelancer in fields such as IT, consulting, journalism, design, etc., your activity will be classified as a liberal profession. To register, you need to send an application to the tax office (Finanzamt), where you will receive a tax number.
  • Trade-related activities (Gewerbe) – see Chapter 1: If your side hustle involves trade, craft or other types of commercial activity, you will need to register your business with the Gewerbeamt (Gewerbeanmeldung) in addition to registering for tax.

4. Obtaining a tax number and paying taxes

After registration, the tax office will assign you a tax number (Steuernummer). This number will be used when issuing invoices and filing your tax return.

When it comes to taxes, there are several key points:

  • Income tax (Einkommensteuer). You are obliged to declare all income earned from freelancing and to pay income tax on it. The Grundfreibetrag (tax-free allowance; €12,348 in 2026) applies to your total annual income, not separately to your side income: if your salary from your main job already uses it up, your freelance income is taxed from the first euro. Only side income of up to €410 a year remains tax-free.
  • Value Added Tax (Umsatzsteuer). If your turnover (Umsatz) exceeded €25,000 in the previous year or will exceed €100,000 in the current year, you are obliged to charge VAT on your services. However, you can make use of the small business scheme (Kleinunternehmerregelung) if your turnover stays within these limits (they have applied since 2025). In this case, you do not need to charge and pay VAT.
  • Record keeping. Self-employed people need to keep track of all their income and expenses, as well as regularly submit a tax return to the tax authority.

5. Social security and health insurance

If you combine freelance side work with a main job, the social security system works differently than for fully self-employed individuals. In this case, your social security contributions are mainly covered by your employer, and your additional activity affects certain aspects of your insurance.

Pension insurance (Rentenversicherung)

If your side hustle is carried out as self-employed work and is secondary (not your main source of income), the obligation to pay contributions into the pension system remains with your employer. Since your main job covers your income for pension insurance, you are not required to pay additional contributions from your side hustle income. However, if your side hustle starts generating significantly more income than your main job, or if it is related to professions requiring mandatory contributions (such as a teacher; a consultant only if they work mainly for one client), you may need to consider additional pension contributions.

Medical insurance (Krankenversicherung)

As your main employer already covers you with health insurance, taking on an additional side job will not lead to having to pay full health insurance contributions twice. However, it is important to bear in mind that your total income (including income from the side job) may affect the amount of your contributions, especially if your income increases significantly.

If your salary from employment is above the Versicherungspflichtgrenze (compulsory insurance threshold; €77,400 a year in 2026), you can switch to private health insurance (private Krankenversicherung, PKV) instead of state health insurance — this is a right, not an obligation. Income from self-employed side work does not count towards this threshold.

For those who continue to have a main job and a side hustle, statutory health insurance (gesetzliche Krankenversicherung, GKV) usually covers all necessary expenses, and the additional income only affects the amount of the monthly contribution.

6. Restrictions on side hustles

When working as self-employed, it is important to consider restrictions from both the tax authorities and your main employer.

  • Time limits. The limit set by the Arbeitszeitgesetz (Working Hours Act; an average of 48 hours a week) applies to employment, including work for several employers at the same time. Freelance work does not count towards it, but your side job must not interfere with your main job, and your employment contract may restrict it separately.
  • Income thresholds. If your income (profit) from side work exceeds €410 a year, you must file a tax return, and this income is taxed together with your salary. The Minijob limit (€603 a month in 2026) does not apply to self-employment.
  • Conflict of interest. If a side job could conflict with your duties at your main job, be sure to clear it with your employer. For example, if you work in an IT company and plan to do freelance work in the same field, this could lead to a conflict of interest. Many employers in Germany include clauses in their contracts that restrict side jobs without their consent.

7. Advantages and disadvantages of side-hustling as self-employed

8. Legal aspects of side hustling as self-employed

Freelancing as a self-employed person in Germany requires not only compliance with tax and financial obligations, but also an understanding of the legal aspects related to your main employment. Your employer may have certain expectations and rules that must be taken into account to avoid conflicts and legal issues.

8.1 The need for agreement with the primary employer

In Germany, freedom of occupation (Berufsfreiheit, Article 12 of the Basic Law) allows employees to do side jobs as self-employed individuals, but many employers include special clauses in employment contracts regulating additional types of employment. This is particularly important if the side job is related to the same field of activity as the main job.

As a rule, the employment contract and the duty to take the employer’s interests into account (§ 241 Abs. 2 BGB) mean that an employee must notify their employer of their intention to take on a secondary job if it could affect the performance of their main duties or potentially create a conflict of interest.

Key points of agreement with the employer:

  • Conflict of interest. If your side hustle is in the same field of activity as your main job, this may be perceived as competition. For example, if you work at an IT company and at the same time offer freelance services in the same area, your employer may demand that you stop the side hustle.
  • Impact on your main job. Side jobs must not interfere with the performance of your main duties. This means that if you are too busy or get tired because of freelance work, which reflects on the quality of your work at the main company, this can become grounds for terminating the contract.
  • Disclosure of confidential information. If you use knowledge gained at your main place of work as the basis for your freelance activities, this may violate confidentiality and trade secret rules. It is important to be careful with information that is protected by contract or company policy.

8.2. What to do if your employer is against side hustles?

If your employer is against your side hustle, you need to:

  • Discuss the situation openly. Make sure your freelancing does not create a conflict of interest and does not interfere with your main job. Sometimes an honest conversation helps to find a compromise, such as agreeing on the number of hours you can dedicate to freelancing.
  • Review the terms of the employment contract. The contract may set out clear conditions regarding secondary employment. If the employer insists on the termination of the side job, this must be legally justified and comply with the terms of the agreement.
  • Get written consent. Even if your employer doesn’t object to side jobs, it would be wise to get this agreement in writing. This will protect you in the event of any future claims.

8.3. Possible consequences of unauthorised secondary employment

If you have not notified your employer about a secondary job and it contradicts the terms of your employment contract or the company’s interests, it may lead to the following consequences:

  • Verbal or written warnings. The employer can issue a warning if they discover that your side job is affecting your main work or breaching your contract.

Termination of employment contract. In the most serious cases, such as the disclosure of trade secrets or engaging in activities to the detriment of the company, the employer may initiate the termination of the employment contract without prior notice.

Chapter 9. Freelancer visas

Important: visa requirements depend on the city, nationality, profession and current residence permit (Aufenthaltstitel). Before applying or starting work, check the current conditions with your immigration office (Ausländerbehörde) or at the German consulate.

If you are an EU/EEA citizen, a separate freelance visa to work in Germany is generally not required. If you are a third-country national, the right to work as a freelancer must be explicitly permitted by your visa or Aufenthaltstitel. The wording on the card and on the Zusatzblatt (supplementary sheet) is important: sometimes only work for a specific employer is permitted, and self-employed activity requires a separate permit.

For freelancers, the Aufenthaltserlaubnis zur Ausübung einer freiberuflichen Tätigkeit (residence permit for freelance employment) under Section 21 of the Residence Act (AufenthG) is used. The official Make it in Germany portal explains the general principle: you need to prove financing for the activity, the ability to support yourself, and the possession of a professional licence, if required for your profession.

Requirements for obtaining a freelancer visa

Requirements depend on the city, profession and current residency status, so before applying you need to check the website of your Ausländerbehörde. They usually look at a few things:

  • Profession and status: the activity must qualify as Freiberufler work (a liberal profession) or another permitted form of self-employment.
  • Funding: you need to show that you can pay for your living expenses and the launch of your activities without illegal work.
  • Customers and demand: letters of intent, contracts, portfolios and business plans help to show the reality of the operations.
  • Permissions: Licences or recognition of qualifications may be required for regulated professions.
  • Insurance: a valid health insurance policy accepted for living in Germany is required.
  • Pension provision: for applicants over 45 years of age, proof of adequate Altersvorsorge is often required.

For example, the Berlin LEA specifically states that a freelance residence permit can be issued if the activity is expected to have a positive economic or cultural impact.

The application process

If you are applying from outside Germany, the process usually starts with a German consulate or embassy and a national D-visa. If you are already legally in Germany and your status allows you to apply from within the country, the process goes through the local Ausländerbehörde.

The practical procedure is as follows: gather the documents, fill in the online form or book an appointment, pay the fee, upload or bring the documents, wait for verification and attend the meeting with the originals. You should not start freelancing before your current status explicitly permits self-employed activity.

Documents for foreign freelancers

The exact list of documents should always be taken from your Ausländerbehörde’s website, but the following are most commonly prepared:

  • passport and current Aufenthaltstitel or national visa;
  • biometric photograph;
  • business description, business plan or Finanzierungsplan (financing plan);
  • portfolio, CV, degrees or proof of experience;
  • contracts, Letter of Intent or letters from potential clients;
  • proof of funds: statements, savings, contracts, income forecast;
  • tenancy agreement and proof of address registration;
  • confirmation of health insurance;
  • confirmation of Altersvorsorge, if required.

The main idea is simple: to show that the business is real, there are clients or a market, there is enough money for living, and the work does not breach your current status.

Visa extension

It is best to start the renewal in advance, before your current Aufenthaltstitel expires. The authority usually checks whether the business is operating in practice: whether there are incomes, accounts, tax documents, insurance, housing and the ability to support yourself without social assistance.

For renewal, it is useful to keep contracts, Rechnungen (invoices), Kontoauszüge (bank statements), tax notices and correspondence with clients on file in advance. If the business has changed, for example if you have changed field or your work has become more like a Gewerbe, it is better to clarify this before submitting. The permit for self-employed activity is usually issued for a period of up to three years and can be renewed if the business is successful and covers living expenses.

Useful resources

To check the current rules, it is best to start with official sources and only then read blogs, forums, and personal experiences:

  • ELSTER — tax portal for registration, returns and communication with the Finanzamt.
  • Make it in Germany: Visa for self-employment — official overview of the visa for self-employment.
  • Make it in Germany: Visa for freelance business — separate section for Freiberufler.
  • Berlin LEA: freelance residence permit — example list of requirements and process in Berlin.
  • Bundesministerium für Gesundheit (Federal Ministry of Health) — basic information on health insurance.
  • Bundesagentur für Arbeit (Federal Employment Agency) — voluntary unemployment insurance for the self-employed.

Freelancer communities in Germany

Communities are useful not as a source of law, but as a way to understand practice: what questions the Finanzamt asks, how people look for a Steuerberater, how long an Anmeldung or the renewal of an Aufenthaltstitel takes. Good places to start:

  • local Slack, Telegram and Discord communities for your profession;
  • LinkedIn groups for Freiberufler, IT freelance and business in Germany;
  • Meetup events for startups, independent consultants and expat communities;
  • professional associations, such as the IHK for trade businesses or sector-specific associations for your profession.

The advice is simple: use communities for experience and contacts, but check tax, visa, and insurance decisions through official sources or with a specialist.

Frequently asked questions

Can you be a freelancer and work full-time?

Yes, but it is necessary to check the employment contract, notify the employer if required, and not violate time, conflict of interest and confidentiality restrictions.

Do I need to open a separate bank account?

For a Freiberufler it is not always legally required, but practically very useful: it is easier to separate personal and business expenses, prepare the EÜR, and answer questions from the accountant or Finanzamt.

Can you start without a tax adviser?

It’s possible if the situation is straightforward and you’re prepared to figure out ELSTER, invoices and the EÜR. If you have employees, international clients, VAT, a visa, a family or a high income, a consultation often pays for itself in peace of mind.

Can I work before getting a freelance visa?

Only if your current Aufenthaltstitel explicitly permits self-employed activity. If the document limits you to a specific employer or there is no permission for Selbstständigkeit, clarify your status with the Ausländerbehörde first.

What is most important to keep for reporting purposes?

Client invoices, receipts and expense Rechnungen, bank statements, contracts, project letters and insurance documents. The sooner you get things organised, the less pain there will be at the end of the year.

Conclusion

Freelancing or running your own business in Germany can seem like an attractive idea, promising freedom and flexibility. However, the reality is that this freedom comes with certain obligations, particularly in terms of taxes, registration and bookkeeping. Germany is a country with a highly developed bureaucratic system, and in order to operate successfully as a freelancer or Gewerbe owner, you need to understand all the nuances of this system.

This document provides a comprehensive guide for those who have decided to work for themselves in Germany. It covers the entire journey, starting from registration and choosing the right form of business activity (Freiberufler or Gewerbe), right through to tax optimisation, bookkeeping and client acquisition.

Key findings:

Choice between freelance and Gewerbe: It is important from the very beginning to determine which category you belong to — freelancer or Gewerbe owner. This determines not only the legal aspects, but also your tax obligations.

Registration and taxes: The registration process requires attentiveness and knowledge of all the details. Be prepared for tax obligations to take up a significant part of your work, and it is important to understand them right from the start to avoid problems with the tax authorities.

Accounts: It is necessary to keep track of income and expenses from the first day. Using specialised accounting software can significantly simplify this process and help you avoid mistakes.

Insurance: In Germany, insurance is not just an option, but an important aspect of protecting your business and personal finances. Health insurance is compulsory for everyone, while liability insurance and pension contributions are compulsory only for certain professions; it is worth including them in your budget from the outset.

Lead generation: A freelancer’s success depends directly on a constant flow of clients. The document provides advice on how to build your client base and use various platforms to find projects.

Freelancing in Germany is not just a job, but a whole system that you need to learn to navigate. This handbook helps you avoid common mistakes and provides tools for successfully running your business. By using this guide, you will be able not only to start your journey as a freelancer or business owner, but also to effectively manage your financial and legal obligations, staying afloat in the German bureaucratic system.

Recent posts

What to read next

The reference book was written by an external author and reflects the status as of the date of its preparation. We cover individual topics on our own pages and keep them up to date:

Leave a Reply

Your email address will not be published. Required fields are marked *