Being a freelancer or self employed has a lot of advantages, but it comes with the requirement of declaring your taxes. While being employed by a company usually shields you from dealing with the financial authorities, as a self employed person you must fulfil various tax obligations.
Registering for self employment: Getting your tax number
Before you start working, you must register with the Finanzamt, the financial authority in Germany.
At this point, you should already have your personal tax ID (Identifikationsnummer), but you still don't have your tax number (Steuernummer). While the former is a personal tax ID, the later is used for reporting your taxes as a self employed person.
You can get the tax number by completing the the form called Fragebogen zur steuerlichen Erfassung, which is submitted to the Finanzamt in the city you live in.
Check out the tax registration form guide here.
What are the relevant type of taxes for self employed persons?
Income tax has to be paid by every individual with income above the minimum threshold. The tax is calculated based on all the different sources of income you might have, including income from self employment, employee income, investments, etc...
For more information about the Income tax, check out the Income tax guide
Value added tax (VAT)
Value-added tax (Umsatzsteuer), also known as “Mehrwertsteuer” in Germany, is a consumption tax placed on products and services.
Usually every business or self employed person must pay VAT, unless you are registered as a small business owner (Kleinunternehmer).
For more information about VAT, check out the VAT guide
Trade tax (Gewerbesteuer) is a tax charged by the local municipalities.
Understanding if you have to pay trade tax can be confusing at first.
There are two types of self-employment in Germany: Freiberufler (freelancer) and Gewerbetreibende (tradesperson). Tradespersons have to pay trade tax while freelancers are exempt from it. You can read more about the difference between sole-traders and freelancers here.
For more information about trade tax, check out the Trade tax guide
Sorted tax guides are provided without liability and do not replace a tax advisor.
To get an accurate answer for your specific case, please consult a tax advisor.
You can always ask one of tax advisors on the Sorted platform.
Looking for a solution to simplify your tax reports? Sorted helps you prepare and send your tax reports to the Finanzamt