Germany offers an attractive environment for freelancers, providing opportunities for both locals and expats. Freelancing in Germany allows you to enjoy the flexibility and independence of self-employment.This guide will walk you through the essential steps to start your freelancing career, covering visa requirements, health insurance, opening a bank account, and managing taxes. Whether you’re transitioning from traditional employment or starting anew, we will help you navigate the process of becoming a successful freelancer in Germany.
What's the difference between freelancing and self-employment?
Although the terms are often used interchangeably, there is a difference between self-employment and freelancing. All freelancers are self-employed, but not all self-employed people are freelancers. In detail:
- Self-employment refers to the status of running your own business or being your own boss. This can include a wide range of activities and business structures. Individuals can provide products or services, run retail shops, consult, or operate in various other business sectors.
- A freelancer, on the other hand, is a type of self-employed person who offers specific services to clients on a project-by-project basis. Individuals typically work independently in creative, technical, or professional fields such as writing, graphic design, programming, consulting, or photography.
Becoming a freelancer in Germany: How to get started
Germany is a welcoming place for freelancers, with a well-structured system to help you establish your business. While the paperwork might seem daunting, the German government has made it relatively straightforward to get started. With the appropriate visa, you can legally work as a freelancer while living in Germany. This chapter will guide you through all the necessary steps, including obtaining your freelance visa and understanding the requirements, ensuring you have everything you need to embark on your freelancing journey in Germany.
Move to Germany and get a Residence Permit
Starting your freelance journey in Germany begins with relocating and securing the necessary legal permissions. If you are not an EU or EEA citizen or permanent resident, you will need a residence permit to work in Germany. Importantly, you cannot start working until you have this permit. For self-employment, this means applying for a German freelance visa, a process that can take between three to six months. However, if you already hold a work visa or a Blue Card, you may already be eligible to freelance.
Freelancer Visa for Germany
To work as a freelancer in Germany, you must secure a German Freelance Visa. This visa allows you to live and work independently in Germany, provided you meet certain criteria and follow the application process diligently.
If you're from a country that requires a visa to enter Germany, you'll need to apply for a long-stay (D) visa from your home country. Upon arrival in Germany, you can convert this visa into a residence permit for freelancing. However, citizens of certain countries like the USA, Canada, Australia, Japan, and others can enter Germany on a tourist visa and apply for a freelance visa from within the country.
Initially, the freelance visa is typically granted for three months. During this period, you must apply for a residence permit at the local Foreigner’s Authority (Ausländerbehörde). The residence permit for freelancing can be extended for up to three years, provided you can demonstrate successful freelance work and sufficient income to support yourself and any dependents.
Path to Permanent Residency
After holding a residence permit for freelancing for three years, you may be eligible for a settlement permit. This is contingent on demonstrating sustained success in your freelance activities and, in some cases, transitioning to a business with a positive economic impact on Germany.
What are the requirements for a Freelance Visa?
To apply for the freelance visa, you need to provide a range of documents, including:
- A valid passport
- Two biometric passport photographs
- A completed visa application form
- Proof of health insurance
- Proof of sufficient funds to support yourself (at least €9,000 per year)
- Letters of intent from potential German clients
- Proof of accommodation and address registration in Germany
- A professional portfolio and CV
- Evidence of qualifications and previous experience in your field
You must typically submit the application for a freelance visa at the German Embassy or Consulate in the country where you currently live. The procedure is the same as applying for any German visa. You are advised to complete the application 3 months before your planned travel date. Send the application documents as originals with a photocopy of each.
Health insurance for freelancers
As a freelancer in Germany, health insurance is mandatory. Navigating the options and requirements can be slightly more complex than traditional employees, but understanding your choices and obligations will ensure you have the necessary coverage.
Unlike employees, who typically split their health insurance contributions with their employers, freelancers must cover the full cost themselves. This means you will be responsible for both the employer and employee portions of the contributions.
Choosing between public and private health insurance
One of the benefits of freelancing in Germany is the ability to choose between public (gesetzliche Krankenversicherung, GKV) and private health insurance (private Krankenversicherung, PKV). Employees generally have to be publicly insured unless their income exceeds a certain threshold, but as a freelancer, you have the flexibility to select the type of insurance that best suits your needs and budget.
- Public Health Insurance (GKV): This is the default option for many, offering comprehensive coverage at a standard rate, which is determined by your income. Public insurance typically covers in-patient and out-patient hospital care, prescription drugs, medical check-ups, and basic dental care. The contributions are calculated as a percentage of your income, with a cap on the maximum contribution amount.
- Private Health Insurance (PKV): Private insurance can be a more personalized option, potentially offering better services and faster access to specialists. The premiums for private insurance are based on your health, age, and the level of coverage you choose rather than your income. This option can be particularly beneficial if you are young and healthy, as it may offer lower premiums than public insurance.
Note: If you are an artist, you might be eligible for the Artists’ Social Security Fund (Künstlersozialkasse, KSK). This fund covers half of your health insurance contributions, similar to an employer's contribution for traditional employees.
Regardless of whether you choose public or private insurance, the coverage generally includes:
- In-patient hospital care
- Out-patient medical treatment
- Prescription drugs
- Medical check-ups
- Basic dental care
Additionally, both types of insurance offer various optional add-ons, allowing you to tailor your coverage to include services such as alternative medicine, private hospital rooms, or extensive dental care.
Income taxes for freelancers in Germany
As a freelancer, you must register your activities with the German tax office and obtain a "Steuernummer" or tax number, which permits you to operate legally as a freelancer and pay taxes in Germany. Registration Process:
- Obtain a Tax ID: Within ten days of registering your address at the Foreigner’s Office (Ausländerbehörde), you will automatically receive a letter containing your personal tax identification number (Identifikationsnummer). This number is different from the tax number you need as a freelancer.
- Apply for a Steuernummer: To get your Steuernummer, you must complete the Tax Number Registration Form, known as the "Fragebogen zur steuerlichen Erfassung." This form requires detailed information about your freelance activities, expected income, and other financial details. Once completed, submit this form to the nearest tax registration office (Finanzamt) in your city of residence.
- Receive Your Steuernummer: After submitting the form, the Finanzamt will process your application and issue your Steuernummer. This number is essential for all tax-related activities, including invoicing clients and filing your tax returns.
Understanding freelancer taxes and the system in Germany
Freelancers in Germany must navigate several types of taxes, including income tax, value-added tax (VAT), and, in some cases, trade tax.
Income Tax (Einkommensteuer): Freelance income is taxed progressively from 14% to 42%, based on your annual earnings. You must file an annual tax return (Steuererklärung) with the Finanzamt, detailing income and expenses. Keeping detailed records of all transactions is essential for accurate reporting and claiming deductions. A tax advisor can be helpful.
Value-Added Tax (VAT): Freelancers typically charge 19% VAT on services. If annual earnings are below €22,000 in the first year and €50,000 in subsequent years, you can opt for the "Kleinunternehmerregelung" (small business regulation), exempting you from charging VAT. However, this also means you cannot deduct VAT on business expenses.
Trade Tax (Gewerbesteuer): This tax applies to certain commercial professions. If annual earnings exceed €24,500, you may owe trade tax, which varies by municipality. Freelancers in liberal professions, such as artists and consultants, are usually exempt.
Working as a freelancer in Germany: How to find jobs
Once you receive your tax number from the German tax office, you are officially eligible to start your freelance activities. This means you can begin invoicing clients and pursuing various opportunities. Here are some strategies to help you find freelance work in Germany:
There are numerous web-based platforms where you can find freelance jobs. Upwork and Freelancer, for example, offer a wide range of freelance opportunities. Xing and freelance.de are more localized platforms that cater specifically to the German market. However, simply registering on these platforms isn't enough. You need to actively engage and market yourself to stand out.
A compelling portfolio is crucial, as well as your chance to present the best of yourself to potential clients, setting you apart from other freelancers. It should include:
- Previous Work Samples: Showcasing your best projects.
- Bio or CV: A clearly written biography or curriculum vitae highlighting your skills and experience.
- Additional Skills: Any surplus skills acquired through specific training or certifications.
However, you should also try networking and attending industry conferences, workshops, and meetups to connect with potential clients and other freelancers. Join professional groups for resources and networking opportunities. Also, inform your personal network that you are available for freelance work. Encourage satisfied clients to refer you to others and provide testimonials for your portfolio or website.
Being self-employed in Germany
Starting a business in Germany as a non-EU citizen requires obtaining a self-employment visa or a residence permit for self-employment under Section 21 (1) of the Residence Act. This visa allows you to legally start and run your own business in Germany. To qualify for this visa, you must meet several requirements similar to the freelancer visa:
You must demonstrate that there is an economic interest or a local need for your business idea. This means showing how your business will benefit the local economy, perhaps by creating jobs, introducing innovative products or services, or filling a gap in the market. Your business plan must illustrate that your venture will have a positive impact on the German economy. This can be evidenced through potential job creation, investment in local communities, or other economic benefits.
You also need to prove that you have the necessary funds to support your business venture. This includes having enough capital to cover initial startup costs and sustain operations until the business becomes profitable. If you are over 45 years old, you must present proof of adequate retirement savings. This typically involves showing that you have sufficient pension provisions or assets to ensure financial security in later life.
Applying for the Self-Employment Visa
The application process for the self-employment visa involves several steps:
- Prepare a Comprehensive Business Plan: Your business plan should detail your business idea, market analysis, financial projections, and the expected economic impact of your venture. This plan is a critical part of your visa application as it provides the evidence needed to meet the visa requirements.
- Gather Necessary Documentation: Collect all required documents, including proof of financial resources, professional qualifications, a detailed business plan, and any letters of intent from potential clients or partners in Germany.
- Submit Your Application: You can apply for the visa at the German embassy or consulate in your home country. If you are already in Germany, you can submit your application to the local Foreigner’s Authority (Ausländerbehörde).
- Attend an Interview: As part of the application process, you may be required to attend an interview to discuss your business plan and how it will benefit the German economy.
- Wait for Approval: The processing time for the self-employment visa can vary, but it generally takes a few months. Once approved, you will receive a residence permit that allows you to start and run your business in Germany.
By meeting these requirements and successfully applying for a self-employment visa, you can take the first steps towards establishing your business in Germany. This visa not only allows you to start your business but also provides a pathway to permanent residency if your business proves successful over time.
German Freelancer Visa vs. Self-Employment Visa
When considering working independently in Germany, it's important to understand the differences and similarities between the freelancer visa and the self-employment visa. Here's a brief overview:
Similarities
- Visa Requirement: Both visas are for non-EU citizens who want to live and work in Germany.
- Business Plan: Both require a detailed business plan.
- Financial Proof: Both need proof of sufficient financial resources.
- Health Insurance: Mandatory for both types of visas.
- Tax Registration: Both require registration with the local tax office (Finanzamt) to get a tax number (Steuernummer).
Differences
The freelancer visa is designed for individuals in liberal professions such as artists, writers, and healthcare professionals. Applicants must demonstrate that their work holds economic or cultural significance in Germany. Unlike the self-employment visa, freelancers do not need to register their business, focusing instead on their ability to support themselves financially.
The self-employment visa is intended for those looking to start a business involving commercial activities. Applicants must show that their business will positively impact the German economy, typically through job creation or innovation. This visa requires a trade license and business registration, along with proof of secured financing for the business venture.
Becoming a freelancer or starting a self-employed business in Germany involves navigating various legal and administrative steps. Understanding the differences between the freelancer visa and the self-employment visa is crucial to ensure you meet all requirements and choose the right path for your professional goals. With the proper visa, a solid business plan, and the right preparations, you can successfully establish your freelance career or business in Germany, enjoying the flexibility and opportunities this vibrant economy offers.
