Working as a freelancer (Freiberufler) in Germany is a popular choice for many. In fact, there are approximately 400,000 contractors across the country, which isn’t surprising due to the many benefits of being self-employed in Germany, most notably the earning potential as well as the ability to work on different projects.
But the freelance lifestyle in Germany is heavily regulated, so it’s vital you take the time to familiarise yourself with local legislation to avoid penalties. In this blog, you’ll find some important pieces of information about being self-employed in Germany post-Brexit.
General contractor guidelines
- All self-employed people need to obtain a self-employed work visa and residence permit before entering into Germany, which can take anywhere from a few days to 8 weeks to process (if traveling from the UK, you’ll need to visit the German embassy in London).
- Regardless of what self-employment classification you fall under, all self-employed workers must register with the local town hall upon arrival.
- Once you’ve registered as a self-employed, you need to apply for a tax code which can be done online with the tax office (Finanzamt).
Working as a freelancer (Freiberufler) in Germany
Being a freelancer is the most popular mode of contracting in Germany. One of the biggest benefits of being a freelancer is that you don’t have to pay the same social charges as regular employees (pension, unemployment, long-term sickness, health) which, in the most extreme cases, can amount to as much as 40% of your income. So long as you make no claims on the state, you’re free from these charges and will just need to pay income tax (Einkommensteuer)each year.
However, since it is mandatory to have adequate health cover in Germany, you’ll always have the responsibility of paying for this, either by paying the health element of social security (approx 15%) or by taking out private health insurance. Most people opt for the non-private option.
You’ll need to obtain guidance from the local tax office (Finanzamt) on how to define your work classification, as this can fall under independent contractors, trade, crafts and professionals and will impact your tax liabilities.
What’s the difference between Freiberufler and Gewerbetreibender?
There are two main types of self-employment in Germany: Freiberufler and Gewerbetreibender.Self-employed people who fall under the category of Freiberufler are qualified and skilled professionals who offer a freelance service. Examples would be doctors, lawyers, pharmacists, independent consultants and accountants. Creative professionals like writers, performers and artists would also fall under this category.
On the other hand, those who fall under Gewerbetreibender would be more business owners who are not service-based, but who earn a living through commercial activity like shop owners, sales professionals and craftspeople.
The local tax office will ultimately determine which category you fall under.
What is Germany’s AUG contract?
AUG is classified as a ‘labour-leasing’ employment model and can be compared to registering with an employment agency in the UK. It’s a much less popular style of independent contracting in Germany with research showing that as many as 75% of highly qualified German freelancers would decline an AUG role unless no other option was available.
Unlike the freelancing model, workers on an AUG contract don’t need to file their own taxes as they’re technically employed by the agency. All taxes and social security contributions are taken care of by the AUG agency, so there is less for you to worry about. However, AUG contractors are ultimately liable to pay contributions that self-employed people can side-step.
AUG workers are also limited to a maximum contract of 18 months, followed by a three-month gap, after which the worker is allowed to return to the same place of employment. It should be noted that employers can offer you a permanent position when working on an AUG contract.
Consult with an expert
As you can see, being self-employed in Germany works a little differently to the UK and has its complications. Just because you’re self-employed in the UK doesn’t necessarily mean this status will carry over into Germany since they have different classification requirements.
Are you looking for a career move to Germany, or looking to discuss your international hiring needs? Here at GR4, we’re experienced in placing tech professionals into the German startup market. To discuss our available opportunities, speak with one of our advisors today.
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