Home
Freelancers typically provide services in their area of expertise and are often considered experts in certain fields and/or engage in creative work.
"The liberal professions generally involve the provision of high-level services in the interest of clients and the public, based on special professional qualifications or creative talent, in a personal, independent, and professionally autonomous manner." (§1 (2) PartGG).
Implementing a business idea as a freelancer comes with several advantages, such as exemption from trade tax, no mandatory membership in the Chamber of Industry and Commerce (IHK), and the option to use simple bookkeeping in ongoing business operations. Of course, as a freelancer, you are more independent, have no set working hours or locations, and if business goes well, you can choose your clients or assignments. However, like all self-employed individuals, you bear the entrepreneurial risk, often work harder and longer than others, and are often left to deal with many problems on your own.
What professions are considered liberal professions?
Determining whether a profession actually qualifies as a liberal profession is not always easy. However, at the very least, the conditions outlined in §18 of the Income Tax Act (EStG) must be met.
This is relatively straightforward for the so-called catalog professions:
- Health professions:
e.g., doctors, dentists, veterinarians, alternative practitioners, dental technicians, physical therapists (physiotherapists) - Legal, tax, and business consulting professions:
e.g., lawyers, patent attorneys, notaries, auditors, tax consultants, tax agents, consulting economists and business economists, sworn accountants, and book auditors - Scientific/technical professions:
e.g., surveyors, engineers, commercial chemists, architects, pilots - Linguistic and information-transmitting professions:
e.g., journalists, photojournalists, interpreters, translators - Artistic professions:
e.g., artists such as painters, fashion or graphic designers, actors, and musicians
And what does a catalog-like profession mean in the context of the liberal professions?
In addition, there are many catalog-like professions (here you can find an overview of the most common ones). What is always crucial here is that the education and the specific professional activity must be comparable to a catalog profession. Comparable also means, for example: If an official permit (e.g., from the health department) is required to practice a catalog profession, this requirement also applies to the similar profession.
Ultimately, it is the tax office and/or the trade office that decides whether an activity is considered freelance or commercial. Therefore, it doesn’t hurt to thoroughly inform yourself in advance. Tax consultants or organizations such as the Institute for Liberal Professions (IFB) can provide information. For absolute certainty, you can request a binding ruling from the tax office, which, although fee-based, is indeed binding.
Here are some additional tips and notes
- Freelancers register with the tax office, not the trade office (within four weeks of starting the activity). There, they receive a tax number.
- Freelancers do not pay trade tax.
- Some freelancers are required to be members of their respective chambers. Additionally, many liberal professions must comply with specific professional and occupational regulations.
- If you engage in commercial activities alongside freelance activities, IHK membership is mandatory (but only for the commercial part if both activities can be strictly separated).
- For the tax office, the taxable profit usually only needs to be determined through a simple income-expenditure statement.
- If you form a partnership with other freelancers, such as a GbR (civil-law partnership) or a partnership company, each partner must have their own expertise. If one of the partners does not have the corresponding expertise and thus does not qualify as a freelancer, or if one of the partners is a corporation (e.g., GmbH), the partnership is considered a commercial enterprise.
- If you form a corporation with other freelancers (e.g., GmbH), it is always considered a commercial enterprise, regardless of the activities of the partners.
- Freelance activities are always subject to income and value-added tax.
- However, the small business regulation might be applicable, which simplifies many things!
You can find more information on the topic of freelancers in the brochure "Gründerzeiten Nr. 17" from the Federal Ministry for Economic Affairs and Climate Action (BMWK).
