Business or liberal profession

Doctors, lawyers, tax advisers, architects and engineers are all examples of liberal professions. Scientific, artistic, writing and child education activities can also be liberal professions. Coaching, consulting and teaching activities might be classified as liberal professions when you can produce a matching university degree. It is important to clarify whether your planned activity genuinely belongs to the liberal professions. Classification can be difficult. Several activities can only be allocated to the liberal professions following a case-by-case examination. Get free advice from the Institut for Liberal Professions.

Impact

• You do not have to pay trade tax.
• A statement of net income is always sufficient regardless of turnover or profit.
• Membership of professional chambers (berufsständische Kammer) may be compulsory, for example for architects, doctors, chartered accountants, lawyers and tax advisers. This includes mandatory contributions to the given chamber’s pension plan.
• Please note: Even when you do not have join a professional chamber, pension insurance may still be compulsory for you.
• You may need to register with the German Social Accident Insurance (“Berufsgenossenschaft”). Please contact the relevant accident insurance institution directly!

Registration

• You do not need to register your business with the Trade Office
• Register your self-employment directly with the Tax Office in two steps and complete the “tax assessment questionnaire” (Fragebogen zur steuerlichen Erfassung).
• The Tax Office will then issue a tax number which you will need to write invoices for your self-employed activity.

Check your qualifications, skills and work permit

For many occupations that belong to the liberal professions your qualifications will need to be checked and officially recognized before you can start self-employed work. Learn more about recognition of your professional qualification and contacts in our special feature, chapter “Check your qualifications, skills and work permit”.

Good to know: Registering as a liberal professional with the tax office only serves the purpose of tax classification and does not constitute official recognition of freelancer status. Find out more in  the FAQs Where and how do I register my freelance activity? and Freelancing in Munich: Freiberufler or Gewerbe?

In general, there is freedom of trade in Germany.

But there are numerous exceptions where you need a permit, supervision or a licence before you can start.

• businesses requiring a permit (erlaubnispflichtige Gewerbe) e.g. brokerage of real estate, financial assets, loans and insurances, financial asset and insurance advisory services, banking transactions, food business serving alcohol, road haulage company, passenger transportation, security business, arms production and trade
• businesses requiring supervision (überwachungsbedürftige Gewebe) e.g. certain used goods dealers, credit agencies, detective agencies, marriage and dating agencies and travel agencies, supply of temporary workers, pharmaceuticals
• businesses of the craft section requiring a licence (zulassungspflichtiges Handwerk) as listed below

Particularities in the skilled crafts sector

Many craft activities may only be carried out if you have a corresponding license. The prerequisite for this is that you yourself meet the necessary qualifications or employ a qualified company management. The Crafts Code determines which professions belong to the crafts and distinguishes between them:

• Crafts requiring authorization, such as bakers, confectioners, tilers, electricians, painters, plumbers, carpenters, hairdressers and others listed in Annex A of the Crafts Code.
• Crafts that are not subject to licensing, such as photographers, cleaners, tailors, beauticians, gold and silversmiths and others in Annex B1 of the Crafts Code.
• Crafts similar to crafts such as alteration tailors, ice-cream producers, carpet cleaners and others in Annex B2 of the Crafts Code.
• There also certain activities that do not count as crafts

Check your qualifications, skills and work permit

Learn more about recognition of your professional qualification and contacts in our special feature, chapter “Check your qualifications, skills and work permit”.

Registration

Register your business with the trade authority and the tax office. If your business requires a permit, supervision or a licence you must provide evidence to the trade office.

Impact

• There is a trade tax liability.
• Income statement or double-entry bookkeeping (depending on legal form or amount of turnover and profit).
• Compulsory membership in the chambers: IHK – Chamber of Industry and Commerce, HWK – Chamber of Skilled Crafts, or both chambers
• Please note: even if you are self-employed, you may be subject to compulsory pension insurance.
• Registration with the statutory accident insurance – Gesetzliche Unfallversicherung may be required. Please enquire directly with the insurance association!

It is possible run both, a business as a trade and a business in one of the liberal professions. These so-called mixed activities can be the case, for example, if a alternative practitioner (liberal profession) also sells food supplements, dietary or other health products (trade). Further examples are described here. If you want to avoid losing your status as a liberal profession, you should separate the liberal profession and commercial activities for tax purposes. This means: either separate invoices are issued for the liberal profession and trade activities or they are listed separately in one invoice. In the income tax return, however, the income must be declared separately. Otherwise there is a risk that the income from the liberal profession will be classified as a trade and thus be liable to trade tax.

Therefore, check which of the mixed activities is to be classified as a trade or a liberal profession. And whether the activities can be clearly separated from each other (“separable mixed activity”) or not (“inseparable mixed activity”).

The Institute for Liberal Professions (Institut für Freie Berufe) will answer any questions regarding difficulties in delimitation. For individual tax advice, contact a tax advisor of your choice.