If you want to become a freelancer, you first have to find out whether you meet the requirements for freelance work, i.e. an independent job as a freelancer. This article is about the possibility of freelance work. To do this, you first need to know the difference between a commercial and a freelance job. This distinction is very important for the tax office – usually not for the health insurance companies, the professional association, the employment agency, and other authorities. Very often not only start-ups but also experienced entrepreneurs confuse the terms freelancer, freelancer, or freelancer. First look at my infographic! You can then choose from the frequently asked questions from my readers to choose a suitable one with my answer. For all other unanswered questions, come to the Facebook Group’s Founders Encyclopedia, where you will be helped, for example, on the subject of freelancers.
Table of Contents
Who is a freelancer?
Freelancers are described in Section 18 (1) No. 1 Income Tax Act, which states:
“Freelance work includes the self-employed scientific, artistic, writing, teaching or teaching work, the self-employed work of doctors, dentists, veterinarians, lawyers, notaries, patent attorneys, surveying engineers, engineers, architects, commercial chemists, accountants, tax consultants, advising people – and business economists, sworn accountants, tax representatives, naturopaths, dentists, physiotherapists, journalists, picture reporters, interpreters, translators, pilots, and similar professions. A member of a free profession within the meaning of sentences 1 and 2 is also self-employed if he does so Operated with the help of technically trained workers; the prerequisite is that he is on reason own managerial and independent responsibility. Representation in the event of temporary prevention does not preclude the assumption of a managerial and self-responsible activity … “
Freelancers are self-employed entrepreneurs and carry out scientific, artistic, literary, teaching, or educational work. In order to differentiate the freelancer from the trader, section 18 of the Income Tax Act (EStG) is used. Section 18 of the Income Tax Act lists all freelance activities as a catalog (catalog professions). Self-employed persons who work in one of the listed professions are freelancers.
According to the Income Tax Act, the following professions count as freelance professions:
- Independent scientific, artistic, writing, teaching or educational work
- Doctors, dentists, veterinarians,
- Lawyers, notaries, patent attorneys,
- Surveyors, engineers, architects,
- Commercial chemist,
- Certified public accountants, tax consultants, economists and business economists, sworn accountants, tax representatives,
- Naturopath, dentist, physiotherapist,
- Journalists, image reporters, interpreters, translators,
- Pilots …
What are similar occupations?
In the list above, in addition to the list of freelance work, there are also similar professions the speech. However, the law is openly formulated in this regard. It is not only state-specific specialist training or a state-recognized professional qualification that enables you to work as a freelancer in the relevant professional branch, but also non-state training, many years of professional experience, along with qualifications or a corresponding license, paves the way to working as a freelancer. For these reasons, health care professions are also among the activities that are permitted as freelancers. Last but not least, health care activities are also freelance. The individual case should always be clarified by a tax advisor, the financial administration or by a corresponding existing (or new) court decision.
How do I become a freelancer?
You now know the difference between freelancers and freelancers. In practice, it is much more important for you to clarify what you have to do to become a freelancer. By defining the start-up strategy with regard to business or freelance at an early stage, you can either register your business start-up with the business office using the form for business registration or with the tax office with an informal letter. Therefore, the start-up strategy must be considered beforehand and not after the business registration.
Who is a trader?
All self-employed persons who do not work according to the catalog professions or similar professions are traders.
Can I choose to work as a freelancer?
Now you have to know that the entrepreneur can not choose the freelance, but there is a clearly defined professional catalog (§ 18 EStG, the so-called catalog professions) as well as activities determined by judgments and decisions, which fall under the freelance activities. Very often there are cases of doubt or as yet undecided activities and jobs, here a tax advisor has to decide together with the entrepreneur whether a lawsuit and thus the legal induction of a freelance activity is worthwhile. Freelance in itself is not a free ticket for the future. If the entrepreneur generates too high a commercial income or receives an excessive salary, the freelance can be revoked by the tax office.
What advantages can freelancers use?
Entrepreneurs whose income is listed in Section 18 of the Income Tax Act generate income from freelance work . It is widespread among founders that freelancers have enormous advantages over traders. We would like to get to the bottom of these supposed advantages below.
The following advantages are summarized in advance:
- No compulsory membership in the Chamber of Commerce or Chamber of Crafts
- no trade tax
- no accounting
- Reduction in social insurance through the artist’s social security fund (for artists and publicists)
Start-up – freelance or self-employed?
Entrepreneurs who are active with the intention of making a profit are demonstrably self-employed. The founder must now check to which type of income his activity can be assigned. If the founder excludes the income from agriculture and forestry and from self-employment, he will generate income from the business. There is also the possibility that the founder carries out various activities that are treated differently for tax purposes. An example of a so-called mixed job is an IT lecturer who also sells hardware or offers PC equipment and repairs.
I’ve always been a freelancer, isn’t there a common law?
The tax office only determines the tax base, which also includes the type of income, for only one year. Entrepreneurs cannot derive customary rights from years of assignment to a particular type of income. If the tax office determines commercial income after years of freelance work in accordance with the tax regulations, the entrepreneur usually has to accept this decision. This reclassification of income has an effect on entrepreneurs whose income is above the trade tax exemption. And all the more so since not only the past tax year can be affected, but all tax years in which there is still no final tax assessment.
Can or must freelancers create a surplus income statement?
A freelancer can always determine his profit using the income surplus calculation (EÜR). The professional must adhere to certain limits. The annual turnover must not exceed 600,000 euros and the profit must not exceed 60,000 euros per year. The trader is only obliged to draw up a balance sheet if the limits are exceeded.
Is the actual taxation of freelancers influenced by the number of sales?
Upon request, freelancers can choose the method of collecting actual taxation. This option is also available to commercial professionals. In contrast to freelancers, traders must not exceed the annual turnover of EUR 600,000 to be able to apply the actual taxation.
Do Freelancers Pay Business Tax?
Freelancers do not have to file a trade tax return and do not pay a trade tax. Traders, on the other hand, have to pay trade tax if the trade income generated exceeds the allowance of EUR 24,500.
Is there a chamber requirement for freelancers?
Certain occupational groups also have to fulfill a chamber requirement, for example, doctors are subject to a chamber requirement and must join the Chamber of Physicians, lawyers have to enter the Bar Association and tax advisors are subject to a chamber requirement in the Chamber of Tax Advisors. Special rules apply to chambered professions. If a profession is one of the liberal professions requiring a chamber, the entrepreneur must register with the corresponding registry office. The liberal professions requiring a chamber include:
- Consulting engineers
- Patent attorneys
- tax consultant
- However, there is no obligation for the Chamber of Commerce and Industry and the Chamber of Crafts.
Does the freelancer have to go to the artists’ social security fund?
The artists’ social fund is the pension fund for artists, musicians, and publicists. There are many other pension plans available for the various liberal professions. During membership, the artists ‘social insurance fund (KSK for short) pays the share of pension, health and nursing care insurance that would be paid by employers’ employees; For this reason, it contributes enormously to the liquidity of the freelancer. Read the founder lexicon on the subject of the artists’ social fund, we answer any other questions about the KSK.
Commercial or freelancer: Do I have the right to vote?
It is not up to you whether you are a freelancer or not. As soon as you start your own business, this status is automatically based on your training and / or your job. The decisive factor is whether your profession belongs to the so-called catalog professions. The legislator has firmly anchored these in Section 18 (1) no.
- scientific, artistic, literary, teaching or educational activity
- Doctors, dentists, veterinarians, naturopaths, dentists, physiotherapists
- Lawyers, notaries, patent attorneys
- Surveying engineers, engineers, architects
- Commercial chemist
- Certified public accountants, tax advisors, economists, and business economists, sworn accountants, tax representatives
- Journalists, picture reporters
- Interpreter, translator
For many of these activities, the appropriate training is mandatory to be able to take up the professions (e.g. doctors, lawyers), others, on the other hand, can become freelancers without special training, as long as they are active in the respective division and can demonstrate relevant professional experience ( e.g. journalists, translators).
When and how must the activity be reported to the tax office?
If you believe that you are working in one of the catalog professions, register as a freelancer within four weeks of the start of your self-employed activity at the responsible tax office. The tax office always determines whether you are actually considered a freelancer or subject to trade regulations.
In many cases, however, this is only checked when an audit takes place years later. If you are subsequently classified as a trader, trade tax for the past years must be paid retrospectively. Freelancers should, therefore, clarify with the competent tax office at the beginning of their independence whether the classification as a freelancer is correct in order to avoid horrendous demands.
Can I subsequently become a freelancer?
Even if you have been a professional for years, this does not mean that you cannot become a freelancer after all. If you practice one of the catalog professions but do not have the required training, you can prove your freelance status, for example, with your professional experience and work samples. It is then necessary to lodge an objection to the current trade tax assessment notice and to file an application for the amendment of notices that have already become legally effective.
If you can prove it successfully, you will subsequently receive freelance status and a refund of the wrongly paid trade tax. There have already been several judgments on this in the past, which often concerned computer scientists, web designers, and programmers, but who were subsequently granted freelance status.
How does the freelancer differ from the trader?
Those who are classified as freelancers have a big advantage. In contrast to the trader, a freelancer does not have to pay a trade tax. A freelancer does not have to draw up a balance sheet regardless of the amount of his profit. He can always make an EÜR. One might ask why is one self-employed being treated differently from the other? The trade tax flows into the small bags from the cities and municipalities. The cities maintain their infrastructure from this. Freelancers are assumed to hardly use the infrastructure. In contrast to a building contractor, a lawyer does not drive a truck through the streets and pollutes the city with stench or noise, according to the theory.
How is a mixed job classified?
The BFH has also issued a fundamental judgment under the ref .: XI R 10/06 of October 18, 2006. According to this, a company in which mixed services are provided must be qualified according to which activity is actually carried out.
Separable mixed activity
If the freelance and commercial activities are easy to separate, e.g. a veterinarian also sells jewelry, the self-employed have income from self-employment and business. The different types of income should not be recorded in accounting and not in a bank account.
Inseparably mixed activity
If the freelance activity is inseparable from the commercial one, the total income counts as income from a commercial enterprise. E.g. an architect sells turnkey houses and brings in his architectural work.
Can you explain freelance to me in the video?
All founders who are not considered freelancers must register their independent activity with the trade office and are therefore subject to the trade regulations. The business registration is subject to a fee. The trade office informs the tax office and the professional association of the registration of the trade.
What are the judgments about freelancers?
The Federal Fiscal Court had to make three judgments in which the tax classification of independent IT service providers was the subject of the proceedings.
A state-certified business administration EDP had trained himself as a self-taught in the setup and maintenance of system software and independently supervised companies with this activity. The BFH found that the breadth and depth of its tasks corresponded to those of a graduate computer scientist and that he had thus carried out an engineering-like, that is to say, the freelance job.
BFH, Az: VIII R 63/06
The BFH also approved the status of a freelancer for another autodidact, who was a state-certified DV business assistant. The plaintiff had provided IT system consulting for his customers and managed company-wide IT projects as an external company. According to the court’s assessment, there was an engineering-like performance, even if the training did not include an engineering degree.
BFH, Az: VIII R 79/06
In another case, a graduate engineer for technical informatics worked as an independent system administrator for several companies and monitored the company networks with the help of their own utilities. The BFH classified the activities as classic engineering services and approved the status of a freelance profession.
BFH, Az: VII R 31/07
Anyone who recognizes their own independent activity in the precedent judgments should inform their tax office as soon as possible that they would like to be classified as a freelancer. This should be done in the form of a detailed description of the activities performed and also contain supporting documents (e.g. invoices). If the tax office follows the explanation, all not yet valid tax assessments will be changed and the trade tax assessments canceled.
But be careful: if the trade tax ceases to apply, the income tax rises and this can sometimes trigger considerable additional payments, for which everyone concerned should be prepared.
How do freelancers and freelancers differ?
Do the terms “freelancer” and ” freelancer” mean different jobs or are there only two terms for the same job? In common usage, we find the term freelancer and freelancer quite often as a common synonym for freelancers. The emphasis here is on the word free – permanent employees or bogus self-employment are to be strictly separated from this.
Note: A freelancer can be a freelancer, but need not. A freelancer can also be a commercial solo self-employed person.
Freelancers do not have to register trade and do not have to pay a trade tax. However, you have to report the start of your self-employed activity at the tax office, which usually happens after the foundation with the tax registration form.
As a freelancer, you should always insist on a written contract with your client before you start to perform. The classification as a freelancer and the work to be performed must be precisely described. Other components include payment, compensation for any travel and material costs, and under what circumstances both parties can withdraw from the contract. Read here how to get orders as a freelancer!
Can a freelancer also be a freelancer?
This combination is of course also possible. A tax advisor or notary can also work as a freelancer. But that doesn’t change his status as a freelancer. Even if the tax consultant works as a freelancer on a specific project, he remains a freelancer.
How do freelancers and freelancers differ?
At first glance, you might think that the terms describe one and the same and indeed, many start-ups deliberately confuse freelancers and freelancers.
Freelancers (also called freelancers, freelancers or freelancers) are initially just like freelancers entrepreneurs and therefore work on an invoice basis. However, the freelancer is an entrepreneur who usually carries out contracts for another entrepreneur personally, as a subcontractor. Form of contracting very common in the service sector. It describes the type of employment in relation to the employee. The freelancer can, therefore, be a freelancer as well as a commercial entrepreneur.
At this point, the list of the synonymous use of the term freelancer suggests that the difference between a freelancer and a freelancer is similar to that described in this article.