1. I want to Start Working as a Freelancer / Contractor. How do I Register for Tax as an Expat?You need to register with your local Finanzamt [link to local Finanzamt finder] as “selbständig”. You can find the required registration form at: https://www.formulare-bfinv.de/
Your Finanzamt will then issue a tax number for you.
2. What do I need to do as a Freelancer / Contractor after I have Registered?Your Finanzamt will ask you to submit monthly VAT returns (unless you are registered as a “Kleinunternehmer” [link]). You will have to report your monthly VAT liability to the Finanzamt and make VAT payments accordingly. The reporting (“Umsatzsteuervoranmeldung”) is done electronically via www.elsterformular.de where you also find the relevant forms. At the end of the year you need to file a profit and loss calculation (“Gewinnermittlung”) as part of your annual income tax return as well as an annual VAT return. This can also be done electronically via www.elsterformular.de where you also find the relevant forms.
3. How do I Pay my Taxes if I Work as a Freelancer / Contractor in Germany?When you register for tax as a freelancer you need to give an estimate regarding your income for the current year as well as the subsequent year. This will be the basis on which the Finanzamt will assess you for preliminary income tax. Preliminary income tax is paid quarterly on 10th March, 10th June, 10th September, 10th December. To make sure you do not miss any of these dates and do not get fined for late payment you can set up a direct debit mandate. This is done through a form which you find at www.steuer.bayern.de/vordrucke/18_allg/teilnahmeerklaerung_LEV_edit.pdf
Your actual tax liability for the year will be worked out when you do your annual returns after the end of the year. In case you have overpaid on your preliminary tax during the year you will receive a refund, if you have underpaid you will have to pay the balance at that point.
4. What is a “Kleinunternehmer”?You can register as a “Kleinunternehmer”, which is a micro business for VAT purposes. This means, that you can completely stay outside of the VAT system. To qualify for this option your total annual turnover must be less than 17,500 € for the current year (in year one of your freelance work). The limit of 17,500 € is an annual amount. If you want to register as a “Kleinunternehmer” at some point during the year this limit is reduced pro rata for this year.
5. Do I need to show VAT on my Invoices if I Work as a Freelancer / Contractor?If you did not register as “Kleinunternehmer” [link] you will in most cases have to show VAT on your invoices if your customer is located in Germany.
The most frequent domestic case we come across in which a VAT exemption applies is teaching income (if your customer is VAT exempt).
If you provide a consulting service to a non-German VAT registered business within the EU you will almost certainly not have to show VAT. To qualify for this exemption you need to make sure your client provides you with their VAT-ID. To check whether their VAT-ID is valid you can use an online tool at www.ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN
If you provide a consulting service to a customer outside the EU you will also almost certainly not have to show any VAT on your invoice.
6. How can I Work out how much Tax I owe?You can work out your annual income tax liability online at www.abgabenrechner.de/ekst
7. My Fees are Paid into an Offshore Bank Account. Do I have to Pay Tax on it in Germany as an Expat?It is completely irrelevant for German tax purposes where you receive your fees or in which currency. As long as you are tax resident in Germany you are taxable on your worldwide income. Literally anything you receive (in any shape or form) in exchange for your services is relevant for tax purposes.