How to File Taxes as a Freelancer in GermanyI love paying and calculating my taxes… said no one ever.

Taxes for freelancers in Germany are different than they are for someone who is employed, simply because freelancers pay and calculate taxes themselves. In contrast, if you were employed, your employer would deduct taxes from your salary directly, and you would not need to do anything, really.

Additionally, a lot of the tax costs are shared between employers and employees, which is not the case for freelancers or business owners, who pay the entire cost themselves.

There are two main types of taxes freelancers pay in Germany: income tax and value-added tax. You only have to pay income tax if you make more than €9,744 per year.

How Does the German Tax System Work for the Self-Employed and Freelancers?

As a freelancer or self-employed in Germany, you have to pay about 14% to 45% of your earnings on income tax. The rate depends on how much you make:

  • Up to €9,744 per year: You are exempt from income tax.
  • €9,745 – €57,918 per year: 14% to 42%
  • €57,919 – €274,612 per year: 42%
  • Over €274,613 per year: 45%

Freelancers pay income tax four times a year, in March, June, September, and December, based on estimations of income for that year. These are known as quarterly advances or prepayments (Einkommensteuer-Vorauszahlungen).

Then, at the end of the year, you calculate all your actual earnings for that year and submit an income tax declaration. If you have paid more taxes than you should have, you will be reimbursed.

How to know how much to pay in tax pre-payments?

When you register your business at the Finanzamt, you have to give an estimate of how much you think you will earn. The Finanzamt will use this to calculate the amount of tax you have to pay in your quarterly pre-payments. In the following years, the prepayments are calculated on your earnings from the previous year.

VAT in Germany for Self-Employed People and Freelancers

In addition to income tax, freelancers in Germany also have to pay value-added tax (VAT), known as Umsatzsteuer in German. Everyone who offers goods and services must charge VAT to their clients and then transfer this sum to the Finanzamt, including freelancers. This process is called Umsatzsteuervoranmeldung (Advance VAT return).

You have to submit your VAT return every month or quarter, depending on instructions from your local tax office. You submit your VAT returns digitally, through Finanzamt’s ELSTER tax portal.

Exemptions from VAT: If you make less than €22,000 in your first year and less than €50,000 in the second year, you are considered a “small business” (Kleinunternehmer) and are not required to charge VAT to your clients.

What is Finanzamt?

The Finanzamt is the German Tax Office responsible for tax collection, tax returns, and business registration on a local level. There are over 600 Finanzamt offices across Germany. When starting out as a freelancer, you have to go to your nearest Finanzamt office to declare your business or freelance activity and get your freelance tax number (Steuernummer). You have to do this before you apply for the freelancer residence permit and before you are allowed to start working.

You also pay your income tax and value-added tax to your local Finanzamt office.

In addition to the Finanzamt, there is also the Bundeszentralamt für Steuern (BZSt), which is the Federal Central Tax Office, a branch of the German Federal Ministry dealing with taxes on a national level.

What is the Elster Portal?

ELSTER (which stands for Elektronische Steuererklärung = electronic tax declaration) is an online tax system designed by the German Federal Central Tax Office (Bundeszentralamt für Steuern). You can use ELSTER to submit annual income tax returns and declarations as well as your monthly or quarterly VAT returns without having to personally visit the local Finanzamt.

To make use of ELSTER, you have to register an account and will receive a Zertifikatsdatei, which is a digital signature. You must save this somewhere because you will need it for all your future logins.

How to Register for Freelancer Tax in Germany?

You have to visit the local Finanzamt to declare your freelance activity and register for freelancer tax in Germany. The process is as follows:

  1. Step 1: Visit the local Trade Office (Gewerbeschein) to register your business and get a license. This step applies only if you are a business owner; if you do not own a business – but have a freelance profession – skip to Step 2.
  2. Step 2: Fill in the Questionnaire for Tax Collection (Fragebogen zur steuerlichen Erfassung). The questionnaire is available at the Finanzamt, where you can pick up a physical copy, as well as online on the website of the German Ministry of Finances (Bundesministerium der Finanzen). You should have your Tax ID Number (you receive this when you register your living address in Germany), your bank details, and a description of your business or freelance activity at hand.
  3. Step 3: Submit the questionnaire to the Finanzamt. You can do this personally or via mail, depending on the specific Finanzamt office.
  4. Step 4: Receive your freelance tax number (Steuernummer). You will receive this by mail within a few weeks.

How Can Sorted Help Freelancers With Taxes?

Sorted is an online tax tool designed specifically to help freelancers in Germany file their taxes and offer assistance from the beginning of their freelance journey. Sorted can:

  • Offer help and guidance while you are initially registering as a freelancer with the
  • Help you file your income tax return and declaration as well as your VAT return and declaration.
  • Help you manage and monitor your expenses and invoices.
  • Help you record your current and past income.
  • Answer any of your tax questions.

Through Sorted, you can submit your tax reports electronically as it is connected directly to the Finanzamt through via official software provider, ELSTER.

How to File Freelancer Taxes in Germany?

You can file taxes directly to the local Tax Office (Finanzamt), online through Sorted, or hire a tax consultant. As a freelancer, you have to pay taxes quarterly as well as submit a tax declaration at the end of the year. Here’s a breakdown:

  • You must submit your income tax prepayments (Einkommensteuer-Vorauszahlungen) every three months at the Finanzamt. The deadlines for these prepayments are by the 10th of March, June, September, and December.
  • The prepayments are not based on your actual income for those months, but on an estimation of your income. This means you may end up paying less or even more than you are due.
  • In your first year of work, the Finanzamt calculates your prepayments based on the income estimate you gave them upon registration. In subsequent years, it depends on the previous year’s income.
  • The Finanzamt will give you a schedule of when your prepayments are due and how much you have to pay when you register for taxes.
  • At the end of the German tax year, which is in December, you must calculate how much tax you actually owe based on your earnings that year and file an annual income tax return. You must file for tax returns by July 31 of the following year.
  • Within six months of submitting your tax return, the Finanzamt will assess your declaration and notify you whether you need to pay extra or if you are eligible for a refund.
  • If you paid more on your prepayments than you should have, you will be reimbursed. If you paid less, you will have to cover the difference (i.e. pay more).

Freelancers Tax Deductions

As a freelancer, you can actually lower your taxable income by deducting certain business-related expenses, such as:

  • Rent or workplace lease.
  • Internet or phone costs.
  • Travel expenses.
  • Equipment and tools.
  • Any purchases or expenses made solely for business purposes.

The Six German Tax Classes

There are six tax classes in Germany, depending mostly on your family status as well as income, which means you could have a different tax class – thus a different tax rate – from your husband or wife. As such:

  • You are in Tax Class I if:
    • You are single.
    • You are in a relationship, but not married.
    • You are someone with limited tax liability.
    • You are separated or divorced.
    • Your spouse lives out of the country.
    • You are a retiree.
  • You are in Tax Class II if:
    • You are a single parent.
    • You receive government benefits.
  • You are in Tax Class III if:
    • You are married or in a registered partnership.
    • You have a higher income than your partner. It has to be significantly higher; you must make at least 60% of your household income.
  • You are in Tax Class IV if:
    • You are married or in a registered partnership.
    • Both you and your spouse/partner have similar incomes.
  • You are in Tax Class V if:
    • You are married or in a registered partnership.
    • You have a lower income than your partner. Your partner will be on Tax Class 3.
  • You are in Tax Class VI if:
    • You have more than one job. This class has the highest tax rates.

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