Freelancing is self-employment that can be done by designers, teacher tutors, copywriters, artists, journalists, dentists, psychologists, and many others. These days, people from different professions, whether in technology, media, or the creative industry, increasingly have to work as freelancers. The realities of 2020 force us to reckon with many obstacles and challenges on developing our career, business, and simply survival. The pandemic has brought dramatic changes to our lives. Bans on gathering from 10-20 people led to the mass sending of employees to remote work. B2P businesses are facing a government-imposed prohibition in-person contact with customers. In such a situation, of course, freelancers and the working population with professions that allow you to work remotely will benefit.
How to become a remote worker in Germany in 2021
Freelancers (Freiberufler) – entrepreneurs who work on the principle of self-employment with several clients and employers, but not for hire. Unlike merchants (Gewerbetreibende), freelancers usually work under their name rather than a company name and do not need to register with a sales office and pay sales tax. Therefore, freelancing in Germany is a flexible profession open to both Germans and expats.
There are few administrative issues associated with confirming the status of a freelancer in Germany. However, before you start working for yourself, you need to overcome several bureaucratic obstacles.
Comparison: Remote worker (Freiberufler) vs. merchant (Gewerbetreibende) in Germany
Before you become a freelancer, you need to make sure that you meet the requirements of German law. There is a legal distinction in Germany between freelancers (Freiberufler) and merchants (Gewerbetreibenden). These differences have important implications for business registration and tax payments.
Freelancers in the Federal Republic of Germany are defined as those who work in the so-called “liberal professions” (Freie Berufe), including:
- Lawyers, tax consultants, accountants;
- Engineers, architects;
- Doctors, dentists, veterinarians, therapists, psychologists;
- Journalists, translators, translators, writers, teachers;
- Artists, photographers, musicians, designers, actors.
An entrepreneur with a different profession is no longer considered a freelancer, but a merchant, and must subsequently register his business with a sales office and pay sales tax.
Ultimately, the final decision of whether a profession is self-employed rests with the tax office (Finanzamt). It will evaluate the position on a case-by-case basis. If you are unsure about your status, please contact your local German tax office.
Remote work in Germany – a hired worker or a freelancer?
Remote work in Germany does not always mean freelance status. Whether the activity of a particular person corresponds to freelancing is determined only by the German tax office. In addition to a specific list of “free professions” for freelancers, there are other conditions:
- Cooperation with at least two clients for one year;
- One client cannot have more than 80 freelance income in one year.
If these conditions are met, the tax officials will identify the applicant who wanted to register their business as a freelancer as a regular hired employee. Why is it important to know your status as determined by the tax office? The point is that tax plans for hired labor and freelancing differ significantly. You can “get” a fine if you don’t follow your tax plan.
Accordingly, the basis for a residence permit in Germany will be different. By first submitting documents to the German embassy or consulate to open a long-term visa and register as a freelancer, you will receive a residence permit for the business. However, if you have only one client throughout the year, you will have to re-register and obtain a residence permit based on employment.
Remote work in Germany – where to start?
For large clients and corporations to work with you, you need to register your freelance business under German jurisdiction. To do this, you must contact the German embassy or consulate at your place of residence. You must select the German region, the city in which you want to register a business. Do not refuse to obtain a residence permit in Germany based on an open business. Your earnings will be quite enough to move for permanent residence in this developed European country.
It is necessary to apply for registration to the consulate, followed by a residence permit. You will be issued a Category D national visa to travel to the country. It is valid for 180 days within one year and will give you enough time to apply for a residence permit while in Germany at the Office of Foreigners. You must apply within the first three months.
As a basis for working as a freelancer in Germany, German officials are ready to accept at least two letters of intent to cooperate from various clients (employers). As we said above, you must have more than one client.
Freelancing in Germany with the right to a residence permit – registration with the tax office
If you are already in Germany, to register as a freelancer, you must fill out the Fragenbogen Zur steuerliche Erfassung (Tax Form) and send it to your local tax office. You can download the form, fill it out online via ELSTER. You must fill out the form in German, then submit a physical copy. If you have any questions or concerns, it is recommended that you contact us for an appointment with a tax advisor who will check everything.
You will need to provide the following details:
- Tax ID Tax ID;
- Description of freelance activities;
- Information about bank accounts in Germany (both personal and business, if you have one);
- Planned income and expenses of the business;
- Planned profit;
- Intention to become a VAT payer.
The IRS will use your answers to determine if you are eligible to be a freelancer. They will then give you a tax number (other than a tax ID), a unique identifier given to you as a business entity that must be shown on all invoices and your tax return. You will also receive a VAT number if requested.