Am I allowed to work as self-employed?

To work as a self-employed person, your residence permit should specify that you are allowed to do so. (You should be able to read „Erwerbstätigkeit gestattet“ or „Selbstständige Tätigkeit gestattet“ on your residence permit.) That would be the case, if your entitlement to refugee protection, right to asylum or subsidiary protection is recognised.

If you already are in Germany and your residence permit does not allow self-employment explicitly, you have to ask for a permission according to § 21 Abs. 6 of the Residence Act at the Foreigner’s Registeration Office („Ausländeramt“).

If your deportation is temporarily suspended ("Duldung") or your application for asylum is still pending, you cannot work as self-employed.

Can I simultaneously work for an employer and be self-employed?

You can work as self-employed besides your job as an employee. This form of occupation is called “Nebenerwerbsgründung”. 

But if you do so, you will be subject to the same regulations as someone who works as self-employed full-time. For your side job, you need a separate tax number, for which you should apply your tax office. If your additional income surpasses 410 Euro (as of 2018) per year, you pay taxes for the income you earn from your self-employment, as well as your primary job. If you win between 410 and 820 euros from your self-employment, you would be subjected to "Härteausgleich" or "compensation for hardship", so you do not have to pay the full taxe. If your income from your self-employment, however, exceeds 820 euros, you would have to pay the full tax for your wins (as of January 2018).

You should carefully evaluate whether a side-job is financially worthwhile before you start. At the end of each year, you must submit a separate income tax return to the tax office for each job- you also have to make social security contributions for each. Such expenses and potential losses can partially negate the amount of tax you should pay. If you submit the documents relevant to such costs along with your income tax return, you can get a part of your tax back. If you need assistance, contact a tax adviser or one of the payroll tax assistance associations, such as www.vlh.de. Their service costs money, i.e. the fees you pay the consultant or the membership charges of the associations, but it can help you avoid paying unnecessary taxes or making any mistakes in the process.

Just like full-time self-employment, you can use some incentives to establish your part-time self-employed activities.

Where do I have to register to become self-employed?

No matter what kind of work you want to do as a self-employed person, you should have a tax number issued by the Tax Office. You will be asked about your job and whether you are a freelancer or have your own bussiness. If you work as a freelancer, there is no other government agency you need to inform. If you have your own bussiness, you ashould also register at the Trade Office („Gewerbeamt“). Then the Trade Office will inform the Tax Office about your registeration. If you are not a freelancer and have registered a business of your own, the tax authorities will approach you on their own accord. In both cases, you must have the relevant qualifications or an authorization to exercise your profession.

Based on where you live, the Tax Office nearby will be responsible for you. To register at the Tax Office, you will need your personal tax ID ("persönliche Steueridentifikationsnummer" or StID). The tax ID is an 11-digit number sent to every individual after his or her first registration in Germany. This identification number would not change throughout your life. If your children are born in Germany, you will recieve their future tax ID number as soon as they are born. If you lose your tax ID, you can ask the federal tax office to send it to you again

What does "freelancing" mean?

Only certain professions are categorised as freelancing professions ("freie Berufe") in Germany. The word “frei” doesn´t imply that they are not regulated. They usually include professions that carry out more elaborated and sophisticated services. Some freelance professions are explicitly mentioned in §18 Abs. 1 Nr. 1 EstG. They are called "catalogue professions" ("Katalogberufe") and can be categorised as follows:

Independent professions that are similar to catalogue professions or considered to be scientifical, artistical, literary, pedagogical or educational activities are also counted as freelancing professions. If you work in a profession that is categorised as a freelancing profession, you are a “Freiberufler” or freelancer.

If you want to work as self-employed in a profession that is not considered a freelancing profession, you have to register as a business owner.

How do I register as a business owner?

If your profession is not classified as a freelancing profession, you have to register as a business owner at a local authority called "Gewerbeamt" or Trade Office.

 

In many professions, namely most of the craftworks, a permit is required before you can set up a business (“erlaubnispflichtige Gewerbe”). It means you have to have certain preconditions if you want to register your business. This could be a professional degree or certificate. The local chamber of industry and commerce or the chamber of craftsmanship provide information on the preconditions of starting a craftmanship business. To check if you need to get a certified copy of your professional certificates,  you can visit  www.anerkennung-in-deutschland.de or www.Handwerkskammer.de.

In the field of skilled craftsmanship, a large number of professions are regulated. That means you need to have a Master Craftsman Certificate to run your own business. Only with such certificate you can acquire the necessary permits and set up or take over a crafts workshop. The chamber of craftsmanship ("Hanswerkskammer") is in charge of most of the regulations for those professions. Some examples of regulated skilled crafts are bricklaying, bakery, carpenter, butchery, car mechanic service and hairstyling work.  The possession of a master craftman certificate is necessary because the risk of damage in those professions is considered to be higher. Therefore the protection of the professionals and the costumers is crucial.

If you run a Trade Business ("Handelsgewerbe"), you may be subject to more responsibilities. It requires extensive accounting work in accordance with the trading code. Apart from the registration at the business authority, you have to apply at the Companies' Registry. You should make your application along with a notary. A business that does not require extensive accounting is called the Small Bussiness ("Kleingewerbe"). To figure out whether your business is a company or a small business, visit IHK Berlin. If you are not sure, you can also ask your local Trade office.

What does „Small Business Regulation“ mean?

"Kleinunternehmerregelung" means „Small bussiness regulation". If you create economic revenue by your work, you have to pay taxes. Income tax ("Umsatzsteuer") is often unofficially called "Mehrwertsteuer" or "added value tax". You are obliged to collect your invoices and send them to the Tax Office ("Finanzamt") once a month.  If your annual income is lower than 17.500 EuroEuro (as of January 2018), you are classified as a Small Bussiness Owner and therefore will be exempt from income tax. For the small business regulation to apply to your business, you have to register as a small bussiness owner at your local tax office.

How do I issue an invoice?

If you provide a service for someone as a self-employed worker, you have to write an invoice within 6 months of the date the service is provided. You need to keep all the invoices that you send or receive up to ten years.

The only occasion writing invoices would not be necessary is when you work for a private person. Services related to estates, like gardening or window cleaning or construction work, require an invoice even if the client is a private individual. Even when it is not mandatory for you to write an invoice, it is always recommended to do so.

What should I include in the invoice?

The mandatory content of an invoice is specified in §14 UStG.

It includes:

If the payment is higher than 250 €, the invoice additionally has to include:

When do I have to pay taxes?

When you work as self-employed, you have to pay income taxes, just as an employee does. You would be exempt from income tax only if your income is lower than the income tax limit of 9000 € (as of January 2018). If you earn more as a self-employed individual, you should fill and submit a tax return to the local tax authority every year, before the 31st of May (deadlines differ from that of employees). You can learn about the process at http://www.elster.de/. However, the Elster portal could be difficult to understand and use, even for some native speakers. Alternatively, you can use online tools such as SmartSteuer.de for your tax returns. Keep in mind that filling your income tax returns could lead to financial gains, as you can deduct all your job-related expenses from your taxes. If you do not fill your income tax returns, the tax office will send you a reminder. In cases of continuous negligence, the Tax Office would independently estimate your incomes and costs which would most likely be to your disadvantage.

If you need help with your income tax return, you can contact a tax adviser or one of the payroll tax assistance associations, such as http://www.vlh.de/. Their service costs money, i.e. the fees you pay the consultant or the membership charges of the associations, but it can help you avoid unnecessary taxes and errors. If the Tax Office finds inaccuracies in your tax return, it can demand further payments later.

If you run your own business, you have to pay business taxes ("Gewerbesteuer") as well. The amount of your bussiness tax depends on where your company is located. If you earn less than 24,500 euros (as of January 2018) of business income per year, you are exempt from the business tax.

Besides, there is the value-added tax, which only applies if you have a turnover higher than 17.500 per year (as of January 2018)-such turnover means you are not categorised as a small business (“Kleinunternehmer”) anymore. Value-Added tax is normally paid monthly in advance. If you cannot afford it, you must apply for an exemption from the monthly prepayments at your Tax Office and justify your application. You can deduct the "input tax" ("Vorsteuer") you have paid to other companies from the Value-Added tax you pay to the tax office.

What does "Scheinselbstständigkeit" mean?

"Quasi-self-employment" ("Scheinselbstständigkeit") refers to a situation in which you work independently ("selbsständig") for a foreign enterprise on paper, but actually you are not doing an independent job. This may, for example, be the case if you work as a self-employed person only for a single company, and so earn your entire livelihood. In this case, the company would have to pay your wage regularly, contribute to your social insurance and pay its share of income tax. Quasi-self-employment is against the law in Germany, and both contractor and the client would be guilty of an offence.