How To Be a Freelancer in Germany - Complete Guide
Last updated: 31 May 2020 / by Sam Williams
If you are looking for work when you move to Germany, you might want to consider becoming a freelancer. A very flexible form of work, freelancing is an option that anyone can explore.
If you have always been employed, being a freelance can feel like a leap into the unknown, but once you make the transition, you might never want to go back!
Going freelance in Germany means there are specific rules and regulations to comply with. Understanding exactly what you need to do and what your best options are can feel complicated, but it’s simpler than it sounds.
Benefits of Freelancing
Making the switch to become a freelancer is a big step, but there are many potential benefits you could enjoy. These include:
As a freelancer, you get to choose when, how and where you work. This allows you to create a work-life balance that works for your own needs, and if you have children, the needs of your family.
Freelancing is a solution that enables you to juggle childcare and work without always being pulled into two different directions.
To earn the necessary income, you will still need to work hard and put in the hours. However, you can arrange these at a time that suits you rather than being restricted to a 9-5 schedule.
One of the highest priorities for many workers is the salary they receive. Negotiating increases with an employer can be awkward and not always successful, forcing you to switch jobs if you want a pay rise.
As a freelancer, you oversee what you earn. If you have a temporary need for more money, you can work longer hours. You are not tied to what an employer wants to pay you, or whether overtime is available. Freelancing puts you in direct control of your income and provides you with the means to earn what you need.
Be your own boss
If you have had bad experiences with difficult bosses in the past, the idea of working for yourself can be incredibly liberating. Being your own boss comes with extra responsibilities, and can be tough at times, but overall, it’s extremely rewarding.
You must be willing to deliver work that’s high quality without supervision and be able to work on your own initiative. If you can tick both those boxes, you will probably flourish, given a chance to manage yourself as a freelancer.
Choose your jobs – and colleagues
Even in the best job in the world, there may be people in the office that you don’t get along with. Or perhaps there are elements to your job that you really don’t want to do. When you’re a freelancer, you can choose who you want to work with, and the tasks you are willing to carry out.
Of course, there are consequences to your decisions, but ultimately the choice is yours. You can decide who you are prepared to work with and what tasks you are prepared to do. As a freelancer, you are in complete control.
Control your career path
Maybe there is a niche that you’ve always wanted to develop and focus on? Or perhaps there is an area of your industry that interests you.
When you are employed, you are limited to what you can work on, unless you change your job – and even then, there is no guarantee of success. When you are self-employed, you can pursue your career down the avenue you choose.
Do I Need a Visa?
Before coming to Germany, you will need to check whether you need a visa. There are different rules for short-term visits and living in Germany to work. If you’re coming from the EU, you won’t need to apply for a visa to work in Germany as a freelancer.
To get approved, you may have to demonstrate your financial security and show how your freelance work will fulfill a particular need within the German economy.
Are you freelance or self-employed?
In many countries, these two terms are used interchangeably. After all, if you are freelance, you are also self-employed, right?
While this is true, in Germany, there are separate classifications for those who are freelancers and those who are self-employed. To make sure you are complying with the law, you’ll need to know which category you fall into.
A freelancer, or a Freiberufler, is a person who is a type of self-employment that falls into one of a limited number of categories. These are normally restricted to jobs that have an academic element in some way or are creative. This means that work that requires a degree or is artistic could be considered freelance. German law defines this type of work as “Liberal Professions”.
Anyone working in the Liberal Professions can register as a freelancer. These are:
- Writer, journalist, teacher, translator, interpreter
- Architect, engineer
- Accountant, tax consultant, lawyer
- Doctor, vet, dentist, psychologist, therapist
- Musician, dancer, artist, actor, designer, photographer
By contrast, a self-employed person, usually referred to as Gewerbetreibende, covers all other types of self-employment. If you have some kind of commercial enterprise, you will normally be classed as self-employed, or possibly a tradesman. These are grouped together for the purposes of German law. Self-employed people quite often sell physical goods or are involved in building or trading.
If you are freelance, to be treated as such, you’ll need to make sure you aren’t just cutting corners to being employed. In other words, you should be independent and able to earn a living from various sources.
German law isn’t keen on a freelancer who earns all of their income from a single client on a long-term basis. While you may work on projects, it’s expected that a freelancer will have multiple clients over the course of a year.
If you earn more than 83% of your income in a year from a single client, you will be judged to be in “fictitious employment”. This will mean that you owe payments to the tax system as if you were employed. The cost of this can run into thousands and be backdated for four years. You, therefore, need to be very clear about what it means to be freelance.
Getting your Tax Code
When you complete your Anmeldung registration, you will have completed the first step in your registration. This provides you with the tax identification number that every resident in Germany has, regardless of their type of employment. This is known as a Steueridentifikationsnummer, often abbreviated to Steuer-ID, and it’s mailed to you within a couple of weeks.
This is not the same as a Steuernummer, a tax number. If you are a freelancer or self-employed, you will need a Steuernummer. This reference number allows you to complete your tax return, so it’s an essential component. To receive it, you’ll need to fill in a form (the Fragenbogen zur steuerliche Erfassung) at your local tax office, but you’ll need your Steuer-ID first.
To see if you qualify, the form will ask you questions about the following:
- The type of work you do
- Estimated earnings and expenditure
- Estimated profit
- Your bank accounts, both personal and business (if applicable)
- Whether you will be charging VAT
If you qualify as a freelancer, the tax office will provide you with your Steuernummer. This must be quoted in all your freelance invoices and on your tax return when it’s due.
There are further steps that apply if you are self-employed, but if you are a freelancer, that’s all you need to do.
Bank Accounts and Freelancers
It’s possible to over-complicate things when you become a freelancer, and your banking arrangements are a good example. If you want to use your own personal bank account for your freelance income, then there’s no law to stop you.
If your freelance income is clear and straightforward, you may find it easier just to operate a single account. There are some banks in Germany that offer dedicated freelancer accounts, but you don’t have to use one if you’d rather not.
Providing you keep very clear records about your income and earnings, there’s no problem with just keeping a single account for all.
Getting Health Insurance
Germany has a statutory health system that is funded by contributions by those that live and work there. Alongside the public healthcare system is a private system that either tops up or replaces the level of cover. As an employee, you only pay half of the contributions as your employer must cover the rest of the cost.
Freelancers must cover the whole of the cost themselves, but you have the benefit of being able to choose whether to take our private or public health insurance.
Employed workers aren’t generally free to pick as the type of insurance they are entitled to is governed by their salary.
If you work in an artistic field, you may qualify for help from a special social security fund, Künstlersozialkasse. This covers half the cost of your health insurance but there are special conditions attached, such as only being allowed to work in this field.
There is a lot to weigh up when deciding on whether to opt for public or private health insurance, and both have pros and cons. Getting the decision right is vital because you can’t easily swap between the two. If you are older or plan to remain in Germany for a long time, you may find the public healthcare system suits you better.
You can find out more about the different types of health insurance in Germany here.
Do I Need Other Insurances?
While there are undoubted benefits to freelance work, you will discover a whole new potential complication.
When you are employed, you do not need to worry about liability as your employer takes care of everything. It is a different matter when you are a freelancer, so you’ll need to protect yourself. It is not as scary as it sounds; insurance is your new best friend and can provide peace of mind.
There are a few different types of insurance you might need, such as:
Professional indemnity insurance
Professional indemnity insurance, also known as professional liability insurance, is something that every freelancer should have. Mistakes can happen to anyone, and professional indemnity insurance protects against the financial consequences when they do.
If you make a mistake when providing professional services, you will be liable to pay compensation. Depending on the circumstances, this could amount to hundreds of thousands of euros, leaving you bankrupt and your business defunct. This type of insurance will cover compensation and costs.
Professional indemnity insurance also includes legal protection against fraudulent or unjustified claims. You may want to defend yourself against a claim and you can use your professional liability insurance to do so.
In some industries, professional indemnity insurance is compulsory. These include:
- Doctors and some other medical professionals
- Tax consultants
- Real estate loan broker
- Insurance intermediary
Even if you the insurance is not mandatory in your profession, some clients may be unwilling to work without it. Examples of this include:
- Management consultants
The potential for damage from a mistake is enormous, and clients are trusting your expertise. If you slip up, the client’s financial consequences could be significant, and that cost is passed onto you.
Public liability insurance
Unlike professional indemnity insurance, which is relevant for every freelancer, public liability insurance isn’t necessary for all. If you work from home and have no face-to-face communication or interaction, you probably will not need public liability insurance.
However, if you meet your clients regularly on your own premises, or travel to visit clients face-to-face, public liability insurance should be something you consider.
Public liability insurance does not cover any injuries you sustain but will protect your business from any claims made against it. If a valid claim is made, public liability insurance covers the cost of your legal defense plus the compensation you must pay.
Most people associate public liability insurance with having physical premises, and this is partially true. If a client hurts themselves on your premises, they may claim by alleging you were responsible. A typical example of this would be a slip on a wet floor, but there are many other types of hazards.
What not everyone realizes is that public liability insurance is necessary if you travel to visit clients on their own premises. They could claim that you caused damage while you were there, leaving you liable for the costs. Without public liability insurance, you will have to pay for your own legal defense and compensation.
Private liability insurance
Private liability insurance is not specific to freelancers as approximately 85% of all Germans take out this cover. However, if you are a freelancer, it is something that is even more essential.
Private liability insurance protects you financially from claims made against you. If you have a mishap or an accident, or your negligence causes harm, private liability insurance will cover the legal costs of the case plus pay the compensation.
Professional indemnity insurance covers you for any mistakes or problems caused by working; private liability insurance covers you as an individual. Private liability insurance isn’t a type of business cover, but it’s vital, nonetheless. It covers the direct and indirect losses you cause.
Imagine you stop off for a coffee on your way home. While in the cafe, you accidentally bump into someone and they drop their coffee all over their laptop. Your private liability insurance will pay for any repairs to the laptop, or a replacement if required. It will also cover the cost of any contracts lost due to the damaged laptop, or repercussions of irretrievable files. This is an example of private liability insurance covering direct and indirect losses caused by an accident you caused.
Tax investigation insurance
Disguised employment (Scheinselbstständigkeit) is an extremely complicated area that you may be guilty of without even realizing. If an employer uses a contractor, their costs will be much lower as there are not the same associated responsibilities as having an employee. Therefore, some unscrupulous employers try to avoid these costs by using contractors instead of employees but treating them as if they were employed. This is known as disguised employment and something that the German tax authority hotly pursue.
There is no single definition of disguised employment, but the more control the employer has over your working hours and what you do, the more you are at risk of falling into the category of disguised employment. There are financial consequences for both the client and the freelancer if the tax authority believes disguised employment exists. Tax investigation insurance protects if the allegation is made and will provide experts to liaise with the tax authority on your behalf. The benefit of this cannot be understated as negotiating what constitutes disguised employment is one of the most complicated areas of freelancer law.
Data and cyber risk insurance
Every freelancer and business have GDPR responsibilities to some extent, and protecting this data is vital. As a freelancer, you are responsible for protecting the data of your client and ensuring no breaches occur. Cyber insurance covers breaches in data protection, including data theft. It may be available as an add-on to some type of business insurance or taken out as a stand-alone product.
If you die, life insurance provides a degree of financial certainty for your loved ones. It can be used to pay for debts, or just to cover the daily living costs. This is particularly important if you are the main earner in the household.
Many employers offer life insurance as part of a benefits package for their employees. As a freelancer you will not have this benefit. It is, therefore, necessary for you to arrange for your own protection. There are many different types of life insurance, term insurance vs whole of life, for example. You can also choose to take out a relatively small sum to pay for funeral and estate costs or a more substantial amount to provide an income for your family.
As a general rule, the earlier you take out insurance the cheaper it will be. This is because it is based on your general health and age. If you are older or have health conditions, it will be more expensive. Therefore, if you think life insurance would be useful in your circumstances, the sooner you take it out, the better.
Keeping Clear Accounts
Whatever field you work in, keeping clear accounts is essential. You’ll need to know what you have coming in and going out, as well as your finances in general. Every year, you will be obliged to complete a tax return, and you’ll need the information to provide accurate details. You could be audited by the tax office at any time too, and they’ll want to make sure that your record-keeping is correct.
Depending on how complex your finances are, you can either use dedicated software to keep track of or just a basic Excel sheet. As long as you’re recording what comes in and what goes out, how you do it is up to you.
If you want to use bookkeeping software for your accounts, the following are very popular:
If you are a high earner or your accounts are complicated, you may want to consider using the services of a Steuerberater, a tax advisor. They are experts on checking what expenditure is tax-deductible, and could help to save you money, despite being a service you’ll need to pay for.
Some of the tax-deductible expenses in Germany include:
- Accountant services
- Office space and equipment; this also applies if you work from home
- Trips for work purposes
- Childcare costs
- Half of your phone bill
- Business dinners or lunches
- Social security contributions such as healthcare and pensions
There are a number of different taxes in Germany, which could apply to the self-employed, but freelancers are exempt from some of these (corporation tax and trade tax).
However, you may still have extra taxes to pay on top of your income tax and church tax (if applicable).
The tax office will calculate your likely income tax based on the information you declared when you registered. They will send you a payment plan of what you’ll need to pay, and the due dates. Payments for your income tax are usually spread out over the calendar year, usually on a quarterly basis.
VAT may apply to freelancers, depending on the level of earnings. VAT in Germany is known as either Umsatzsteuer (USt), or the older name of Mehrwertsteuer (MWSt). If your profit is less than €22,000 in your first year, and less than €50,000 in subsequent years, you don’t have to pay VAT. This might sound like a benefit, but it means that you can’t deduct any VAT you paid for business expenses. If you are below these levels, you can still register for VAT if you want to.
If you decide to charge VAT, you’ll need to add an extra 19% on top of your usual professional fees. This money is not yours; when received, you must set it aside so it can be passed straight to the tax office. You can make these payments monthly, quarterly or annually. Any VAT that you paid on your business expenditure can be deducted from the VAT you are due to pay the tax office.
You’ll need to consider very carefully whether you want to register for VAT or not. Once you have made your decision you’ll be tied into it for a minimum of five years.
Social Security Contributions
Employees in Germany have money deducted from their wages to cover the various types of social security contributions. Freelancers aren’t subject to the same rules and aren’t obliged to pay compulsory social security contributions. They will, however, need to take care of some expenses which fall into this bracket:
In Germany, you’ll need to pay for some kind of health insurance. This is compulsory and will also entitled you to long-term care and sickness benefits. Under the public state scheme, your immediate family members will also receive cover. This includes all your dependent family members. Contributions to the public healthcare scheme are on a sliding scale calculated on your income. Employees only have to pay half the cost, as the employer pays the other half. As a freelancer, you’ll have to pay the whole lot yourself. This means that public healthcare will cost you double than that of an employed person on the same income.
The only exceptions are some freelancers within the creative field, such as writers or artists. They can apply to something known as Künstlersozialkasse (KSK), which will cover 50% of the cost of their public healthcare.
An alternative to the state health insurance is a private scheme. High earners who are employed can also access private healthcare rather than relying on state cover. There are many benefits to choosing private healthcare, and for a freelancer, it may be cheaper too, especially if you’re in good health and relatively young. However, unlike public healthcare, the terms of private schemes can vary. You will need to check that it includes long-term care and sick pay as not all of them do.
Freelancers can choose whether to contribute to the statutory pension scheme, but workers in certain fields are obligated to pay. These include:
If you’re not in one of these groups, it’s up to you whether you contribute to your pension. If you want to, you’ll need to pay at least a minimum of 18.6% of your income.
You can pay more than this if you want. If you are a member of the KSK, 50% of your contributions will be covered. Even if you’re not a member of the KSK, you can apply to a scheme that covers half of your pension contributions for the first three years. This is intended to support fledgling freelancers while they develop and establish their business.
Another element to the social security contributions that employed workers pay into is for unemployment cover. Freelancers aren’t obliged to pay into this scheme, but given the volatility of the self-employed market, it’s highly recommended. Making these contributions ensures that you will qualify for unemployment benefit if your business is disrupted.
Finding Clients – Become a Successful Freelance Story
If you want to work as a freelancer, you will find a huge online community of fellow freelancers from all over the world. If you can work remotely, you may even be able to work for clients in other countries. Keep a portfolio of your work to show prospective new clients and networks regularly. If you are brave enough to make the change, you could enjoy real success!
Germany welcomes entrepreneurs, both the self-employed and freelancers. However, to find the best contracts for your industry, you will need to join online networks. There are several huge freelancing networks where you can hook up with potential clients from all over the world. These networks provide a place to find new contracts but have other benefits too, such as escrow services. This can be important for a new contract, especially where you’re working remotely.
An escrow account allows money to be placed in a holding account and released when the work is completed. This type of arrangement reassures you of knowing that the client genuinely intends to pay you and ensures that the money can be released when you complete the work.
There are many top sites, and each have their own unique character. Some sites may suit you better than others, but it is a good idea to register on more than one site. The more you use them, the higher your rating will be, which gives you an advantage over other freelancers competing for the work.
To read more about each of these sites and to find more, take a look at the Ultimate List of Freelance Platforms for Germany.
Enjoy your Freedom
Many freelancers enjoy the freedom and flexibility that their work offers them. With the ability to choose who to work for, and what they want to do, it’s a very liberating choice.
There can seem to be a lot to think about, but once you have a system in place, you’ll be surprised at how simple it is. Our guide should have helped to clarify what you need to do and help you make a start on your new career as a freelance worker in Germany!
Frequently Asked Questions
Here are some of the most common questions about being a freelancer in Germany.
Can I have a regular job and be a freelancer at the same time?
Yes – this is completely fine. In fact, this is how many freelancers start. By having a regular job and freelancing as a sideline, it is possible to gradually build up your business while still having the security of a regular income. More than three-quarters of a million workers in Germany also freelance, and this number is rapidly rising all the time.
What insurances do I need to start working?
Aside from health insurance, the main cover you need to work as a freelancer are private liability insurance and professional liability insurance.
These protect you from financial ruin if you have a mishap or accident, or you make a mistake in your professional work.
You are also protected from unjustified claims and will be able to defend your case. Professional liability insurance is compulsory in some industries, and you will not be able to work without it. However, even if it is not legally required, it’s not advisable to start work without this type of protection in place.
If you have your own premises, public liability insurance will be vital too, for the same reasons.
Can I freelance as a student in Germany?
Yes – and no! It depends on your nationality.
If you are from the EU/EEA/Norway/Switzerland/Lichtenstein/Iceland, you can freelance as a student in Germany.
Many students work as freelancers alongside their studies. If the two areas are connected, this can be very beneficial for your long-term prospects and success.
The only stipulation is that your self-employment must be part-time. This is to ensure that any working activity does not compromise your studies.
You should inform your health insurer that you are also freelancing on a part-time basis. Most companies will only permit a maximum of 20 hours work per week when you are registered as a student.
If you exceed 20 hours you will be required to start paying into the German social security system as a regular worker.
If you are from outside the EU/EEA/Norway/Switzerland/Lichtenstein/Iceland you can work for up to 120 full days or 240 half days per year. However, this work cannot be either freelance or self-employed.