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 and depends on the individual case! 

Some liberal professions have to observe special rules of their profession. To find out if the qualifications which you acquired in your home country meet with these requirements, please go to the Federal Recognition Portal or book an appointment with the city’s Foreign Qualification Advisory and Support Service “Servicestelle zur Erschließung ausländischer Qualifikationen”,  the local Chamber of Commerce and Industry or the Chamber of Skilled Crafts.

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 questionaire” [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.

In general, there is freedom of trade in Germany. But: There are trades requiring a permit, trades requiring supervision and trades requiring a licence (= craft), for which you need a special permit or licence.

Effects

• There is a trade tax liability.
• Income statement or double-entry bookkeeping (depending on legal form or amount of turnover/profit).
• Compulsory membership of the Chamber of Industry and Commerce (IHK) and/or Chamber of Skilled Crafts (HWK).
• Please note: even if you are self-employed in a trade, 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!

Registration

Register your trade with the trade authorities and the tax office.

In general, there is freedom of trade in Germany. However, there are trades that require a permit or supervision for which you need special documents or a permit to register. For trades in the skilled trades that require a licence, you need a licence from the Chamber of Skilled Crafts. In addition, there are activities in the skilled crafts sector that are not subject to licensing and activities similar to skilled crafts or activities that are not classified as skilled crafts at all.

Particularities in the skilled crafts sector

Many craft activities may only be carried out if you have a corresponding licence. 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 authorisation, such as bakers, confectioners, tilers and others listed in Annex A of the Crafts Code.
• Crafts that are not subject to licensing, such as photographers, building cleaners and others in Annex B1 of the Crafts Code.
• Crafts similar to crafts such as beautician, alteration cutter, ice-cream maker and others in Annex B2 of the Crafts Code.
• These activities do not count as crafts

It is possible to be both a freelance and a commercial practitioner. These so-called mixed activities can be the case, for example, if a freelance alternative practitioner 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 freelancer, you should separate the freelance and commercial activities for tax purposes. This means: either separate invoices are issued for the freelance and commercial 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 freelance income will be classified as commercial and thus liable to trade tax.

Therefore, check which of the mixed activities is to be classified as commercial or freelance. 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.