What are common misunderstandings about freelance work

Commercial or freelance?

Would you like to work commercially or as a freelance? And do you even have a choice?

Do you want to be self-employed - but commercially or as a freelancer? Do you even have a choice? And what are the consequences?

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When you go into business for yourself, you have to decide many important questions right from the start. One of the most urgent is whether you want to (or must or can) do business or freelance work.

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Self-employed you are in both cases: both as a freelancer and when you run a business. Freelancers do have a few, however worthwhile benefits:

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  • You don't pay Business tax.

  • You can the Actual taxation apply for.

  • You only need one Income surplus account (EÜR).

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If you are just starting out on your own, the advantages of these three points are probably not immediately apparent. So let's take a look at the related Consequences throw.

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The easiest way is with the trade tax. It is so called because (almost) all traders have to pay it, but freelancers never. It is calculated from the profit (with a few surcharges and discounts) and amounts to 3.5%, the so-called Business tax index.

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The good news is that there is one Allowance of currently 24,500 euros, so you don't have to pay any trade tax on a lower profit.

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The bad news, however, is that every municipality (because it's a municipal tax) has this business tax index with a Rate of assessment multiplied, which is typically between 300% and 450%.

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Example: trade tax in Aachen

In Aachen, for example, the rate of assessment is 445%. The trade tax is calculated as follows:

50,000 euros profit - 24,500 euros tax exemption = 25,500 euros are taxable

25,500 euros * 0.035 * 4.45 = 3,971.63 euros trade tax

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Since 2008, the paid trade tax has been partly allowed with the Income tax offset up to a rate of 380%. This significantly mitigates the difference between tradespeople and freelancers, depending on your personal income tax rate.

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Example: Offsetting against income tax

In Aachen, the assessment rate of 445% exceeds the maximum permissible proportion of 380%. So you can deduct (25,500 euros * 0.035 * 3.8 =) 3,391.50 euros from your income tax.

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Interactive business tax calculator

You can find out how high the trade tax is in no time at all: with our Business tax calculator.

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Usually you will already have been to the tax office VAT payableas soon as you write an invoice. You owe the state the amount known as sales tax as soon as the ink has dried on the paper.

It doesn't matter that your customer pays the bill in two to four weeks or not at all. herself are liable to the tax office for the tax amount calculated in his name, not the invoice recipient.

With actual taxation the reason for the obligation to pay changes. While you usually already have agreed If you have to pay amounts (i.e. according to the invoices and their earlier date), the captured Amounts (i.e. the incoming payments and their later date!).

Paragraph 20 of the sales tax law offers this possibility in paragraph 1 sentence 1 number 3 for Freelancers of any kind of turnover. As paragraph 1 sentence 1 number 1 shows, this is also possible for traders with sales of up to 500,000 euros. So it is by no means an exclusive feature of freelancers and the turnover limit is extraordinarily high even for tradespeople.

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Income surplus account (EÜR)

Theoretically, freelancers can add up all income on a piece of paper, subtract all expenses and declare the difference as profit. This is an income-excess calculation. However, the tax office insists on that To complete one Form, the Annex EÜR.

An EÜR is basically easier to create as a balance sheet (to which sole proprietorships with a turnover of 500,000 euros or more or a profit of 50,000 euros would be obliged). However, it should not tempt you to really just hand in a few cluttered slips of paper, because it helps you to keep the necessary overview of your finances right from the start.

It is also advisable to use the Help from a tax advisor to use. Of course it costs money, but you will learn about flat rates, deductible costs and depreciation that easily make up for these expenses.

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Not only freelancers, but also most small businesses can benefit from the simplified accounting rules. You can find out what you need to consider in the so-called surplus income calculation in the practical guide: EÜR - This is how the surplus income calculation works.

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What is better? Freelancer or trader?

As we've seen, they are differences if you take a closer look, even not so serious. Small traders are treated almost like freelancers. It only gets exciting when your profit exceeds 24,500 euros (because of the trade tax then due) or even 50,000 euros (because of the balance sheet obligation then applicable).

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Does your job even come into question as a freelance profession?

The question arises "do you prefer a commercial or a freelance profession?" at all? Because actually it has to be put differently:

Allowed to Do you even consider yourself a freelancer?

There is one in Section 18 of the Income Tax Act List of professions (the so-called "catalog jobs") that are classified as freelance. These include the well-known architects, doctors and lawyers, but also interpreters, translators and guides.

The main problem within the IT industry is that their Job profiles not mentioned there are. Although this list is not exhaustive, as the phrase "and similar professions" suggests, it is difficult to convince the tax office that your job fits into it.

The decisive factor for the classification is not how you describe yourself or your job, but what you actually do. The same occupation can include freelance and self-employed activities. The demarcation is often difficult to understand for normal mortals - programmers of "trivial software" are, for example, traders. Accordingly, such disputes frequently concern the tax courts.

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Freelancers AND tradespeople - both are possible!

The simplest solution to unclear job descriptions is to use this financially and organizationally separate. Summarize all freelance activities and outsource the work that appears to be commercial.

As long as you're here at akademie.de work as an author or pass on your knowledge as a lecturer at congresses, you are freelance. However, if you are specific in other projects program or create websites, that no longer falls under the "scientific, artistic, literary, teaching or educational activity" according to § 18 EStG.

For the professional profit there are no business taxes anyway and with the commercial profit you (hopefully) stay below the tax exemption. Of course that's a little more organizational effortto always separate everything neatly, but it could be worthwhile.

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For the actual design of a freelance and commercial work in personal union, you should definitely consult a tax advisor so that it does not fail later due to objections from the tax office.

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It is not enough, however, that you just decide to go ahead. This is always needed in Germany Forms. In these two cases, however, it is quite simple:

  • freelancer have to report directly to the tax office and fill out the "Questionnaire on tax registration", which is used to calculate the sales tax advance payment.

  • Traders must register their trade with the responsible office (public order office, municipal office, etc.) and describe it with reasonable accuracy. The trade license costs 10-70 euros. The tax office will be informed automatically and will also send you the "Questionnaire on tax registration".

For tradespeople, however, it can get much more complicated because there are still certain areas (restaurants, groceries, money and real estate transactions, for example) additional provisionsthat must be observed.

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It's best to ask yours local Chamber of Commerce (Chamber of Commerce and Industry) for information, brochures and advice. There you will also find out where you have to register with what information.

The support from the IHK does not cost anything, at least not directly. Businesses are namely Forced members in the IHK and have to pay an annual, sales-related contribution if they make more than 5,200 euros in profit. Only (first-time) start-ups remain free of charge for two years, as long as their profit remains below 25,000 euros.

Freelancers, on the other hand, never have to go to the Chamber of Industry and Commerce regardless of profit or turnover. However, one can professional chamber membership be a basic obligation (medical association) or a prerequisite for using the professional title (architectural association).

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It is easier and cheaper to do freelance work, but it is not a disaster when you have to register a business. Alternatively, you can also split up your activities in order to benefit as much as possible from freelance benefits.

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You can read more about how to find the right legal form for you in the following articles:

You can find everything you need to know about starting a business in the founders section at akademie.de.