Freelance or Trade and Business in Germany
Running a BusinessWorking

Making the Decision Between Freelance or Trade and Business

By on February 13th, 2018

Starting up a business for the first time in a brand new country might include some barriers. The way you register yourself as a freelancer or trade and business is often times very different from country to country. So, in order to give you a better understanding on what might be right for you while living here in Düsseldorf, we asked Christian Schmidt, Founder, Tax Advisor and Lawyer, at Rechts- und Steuerberatung Schmidt in Düsseldorf, to give you a better understanding of how it all works here in NRW.

 

Being self-employed in Germany – Freelancer or trade and business?

When you take that first step to becoming self-employed in Germany, the first question that often arises is ‘how do I register my business?’. This depends on the kind of self-employment you are looking at running, respectively the kind of performed activity. The following article specifies this topic as well as the pitfalls which have to be considered. This post specifically addresses expats who are self-employed, but not running a GmbH.

 

How to distinguish between freelance activity and trade and business?

When self-employed in Germany, your income from freelance activity vs. your income from trade and business activity will greatly differ. Therefore, it is important to check which kind of job you are hoping to perform in order to proceed with the correct business registration to avoid any negative consequences.

 

Am I a freelancer or trade and business?

According to the German income tax law, freelance activities include independently performed positions such as academic, artistic, literary, teaching or educational jobs. The German income tax law (§ 18  Einkommensteuergesetz) offers a detailed catalogue of jobs which belong to freelance activity:

 

Extract of the catalogue:

BranchExample
Legal, economic and tax adviceLawyer, Tax advisor, Notary, Accountant, Auditor, Patent lawyer, Consulting economists
Medical sectorDoctor, Dentist, Veterinarian, Physical Therapist
CultureJournalist, Translator, Interpreter, Photojournalist
Technology,  scienceEngineer, Architect, Chemist


According to the German income tax law, “similar jobs“ also belong to the freelance activity category. But how are “similar jobs” defined, what are their characteristics?

Characteristics are as follows:

  • Special professional education (Longstanding professional experience can be sufficient in certain cases. The special skills can also be acquired in a self-study.)
  • Independent, personal and professional delivery of services
  • Services of high quality (e.g. business consultant with an economic university degree)

That’s why also artists and teachers who are performing their job independently are assigned to freelance activity.

 

There are two main criteria to distinguish between freelance activity and trade and business:

  1. Freelancers are generally working in the service sector. To provide their services, they do not have to produce any products.
  2. The second criteria is that a freelance activity generally requires a university degree, special skills and know how or artistic talent.

All self-employed persons who do not perform an activity listed in the catalogue or which do not belong to “similar jobs”, are assigned to trade and business. Typical trade and business activities are:

    • Hairdresser
    • Operator of a Restaurant or hotel
    • Owner of a (online) shop
    • Craft activities (Exception: artists)
    • Household-related services e.g. cleansing service

 

Creative jobs: Freelance activity or trade and business?

Especially in the field of creative jobs, it is difficult to decide whether a job belongs to freelance activity or to trade and business. In this regard, the law is quite complex.

Basically, the following applies:

  • Artists or publicists that mainly deal with music, visual or performing arts, journalism or writing. These jobs belong to freelance activity.
  • On the other hand, IT jobs such as graphic designer, ad writer and designer can be seen as trade and business and as freelancers.

There is a very fine line, which is why it is so important to ensure you are registering for the correct business application.

 

What are the tax advantages and tax consequences?

  • Freelancers do not have to register their business at the trade office, they only have to register their business at the tax authorities
  • Freelancers do not have to register their business in the commercial trade register
  • Freelancers do not have to pay to the Chamber of Industry and Commerce (IHK)
  • Freelancers do not have to pay trade tax
  • Freelancers do not have to publish a balance sheet

 

As the distinction between freelance activity and trade and business is not always easy, and due to its complexity, we recommend to always check it in detail to avoid any negative consequences. If you have any questions, please contact Rechts- und Steuerberatung Schmidt Photo on Visualhunt.com.


Do you have more questions about living #LifeInDüsseldorf? Feel free to send us an email with your question at hello@lifeinduesseldorf.com. If you have tips you’d like to share with others, we’re also accepting guest posts which include the author’s name, bio and photo. 

Looking for some more tips? Join our group of community explorers and register for our monthly newsletter (packed with the hottest events, seasonal activities, upcoming job opportunities and more)!

TAGS

LEAVE A COMMENT

Life in Düsseldorf
Düsseldorf, Germany

This is our online publication for sharing the best about life in Düsseldorf in a generous and honest way. We spend our mornings writing content and our afternoons interviewing locals, participating in forums and calling businesses so you don’t have to.

Here We Are
Join us on Facebook
Newsletter

SIGN ME UP...

For monthly highlights 📍, job opportunities 📘, discounts 🔑, tips 💡and events! 🎉

Enter your name and email to consent to joining the Life in Düsseldorf newsletter list, to process your email address to send you monthly updates. You can unsubscribe anytime via the unsubscribe link in all of our emails.
New to Düsseldorf?

Looking for Another Language?
Join us on Instagram
Proudly Supported By:

Fatty's Irish Pub

Follow us on Twitter
  • The picturesque bridges in #Düsseldorf are just one of many reasons to visit this awesome city! 🙌😍 https://t.co/Ry2g9DESob

    Tweeted on 02:36 AM Jun 21

  • Düsseldorf’s a sea of green in the #springhttps://t.co/plZQalWvku

    Tweeted on 02:48 AM Jun 20

  • Why not roam the gardens on #Düsseldorf today and see what you can find?! 🌿🖌 Here’s one of our favourite spots 😍 Ca… https://t.co/qflJ88A9zW

    Tweeted on 08:47 PM Jun 19

Looking for a job?


Our Tip For Your $
The Best Weekend Getaways

Download the Full Guide

We’re Here to Help