Freelancers are natural persons who carry out a self-employed scientific, artistic, literary, teaching, educational or comparable activity and thereby generate income from self-employment within the meaning of the German Income Tax Act (EStG §18). For accounting practice this means: different rules than for commercial businesses, usually the income-surplus calculation (Einnahmenüberschussrechnung, EÜR) instead of double-entry bookkeeping, and in most cases no trade tax liability.
Distinction from commercial business and legal basis
The classification as a freelancer is determined by the EStG (§18) and case law. Typical listed professions include doctors, lawyers, tax consultants, architects, engineers, journalists, artists and similar occupations. The decisive factor is predominantly the personal, professionally independent and scientific or artistic nature of the activity.
- No trade registration: Freelancers generally do not have to register a trade (Gewerbe); instead they register their activity with the tax office.
- Trade tax: Genuine freelancers are normally not subject to trade tax (GewStG). Borderline cases (e.g. technical services with a commercial character) should be clarified with a tax advisor or the tax office.
- Commercial bookkeeping obligation: The obligation to keep double-entry books arises from the German Commercial Code (HGB); many freelancers are exempt from this and use the income-surplus calculation (EÜR, §4 para.3 EStG).
Accounting obligations and practical implementation
For the day-to-day accounting of freelancers clarity and GoBD-compliant filing are central. Most freelancers use the EÜR, record income and expenses chronologically and file supporting documents systematically.
Einnahmenüberschussrechnung (EÜR) vs. double-entry bookkeeping
- EÜR: A simpler form; records cash receipts and payments; recognised for tax purposes for most freelancers (§4 para.3 EStG).
- Double-entry bookkeeping: Mandatory when commercial thresholds under the HGB are exceeded or for certain legal forms (e.g. GmbH).
Practical bookkeeping tips
- Keep business and private accounts separate.
- Scan and archive receipts in a GoBD-compliant manner; observe retention periods (usually 10 years for tax-relevant documents, AO §147).
- Monthly bank reconciliations and categorisation of income and expenses simplify VAT prepayments and the year-end accounts.
- Use accounting software that supports EÜR, depreciation (AfA) calculations and VAT prepayments.
Taxes, invoicing and prepayments
Freelancers must observe various tax obligations. Important practical points:
Income tax and advance payments
- Income from freelance activity is declared in the income tax return; the tax office may set advance payments.
VAT and small business regulation
- You are liable for VAT unless you opt for the small business regulation (§19 UStG) or your turnover exceeds the thresholds. If you apply §19 UStG you issue invoices without VAT but must indicate that the small business rule is being used.
- Under standard taxation: VAT prepayments are due monthly or quarterly depending on turnover, with an annual VAT return at year-end.
- Invoice requirements are governed by UStG §14: complete invoice details, tax number or VAT ID when VAT is shown.
Depreciation (AfA), income-related expenses and business expenses
- Purchases of assets with a useful life of more than one year must be depreciated over their useful life (AfA) (EStG §7).
- Low-value assets (GWG) can be expensed immediately if the applicable limits are observed.
Practical examples and typical scenarios
Concrete examples help with implementation in bookkeeping:
- IT consultant (freelance): Issues invoices to clients, uses the EÜR, deducts travel costs, specialist literature and software licenses as business expenses. If turnover limits are exceeded or by conscious choice, they opt out of §19 UStG and charge VAT.
- Graphic designer/artist: May be eligible to contribute to the Künstlersozialkasse (KSK); income treated as freelance income, EÜR applied, and pay attention to the tax treatment of license fees and copyrights.
- Medical practice: Often organised as group practices; distinction between freelance activity and any commercial portion (e.g. MVZ) is required. Check VAT exemption for certain healthcare professions.
For complex borderline cases (classification as freelancer vs. commercial operator, setting up a group practice, use of external personnel) it is advisable to consult a tax advisor to identify possible trade tax or accounting law consequences in good time.
Practical tip: Keep a structured filing system for documents from the start, use appropriate accounting software and clarify the classification of your activity with the tax office or a tax advisor when in doubt. This helps avoid additional tax assessments, delays in prepayments and unnecessary audits.