So you’re living in Germany and want to start working for yourself. Nothing complicated – no GmbH, no employees to manage. Just you. You’re looking to start freelancing. Or… so you think.
You see, in Germany there’s an important legal distinction between two separate types of solo self-employment. Are you a Freiberufler or a Gewerbe? This is a question every self-employed person asks when starting out.
In this article, we’ll explore what these terms mean, how they differ and what this means for you.
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If you’re new to the German self-employment scene, you might be under the impression that the English term ‘freelancer’ is synonymous with ‘Freiberufler’. But this is, strictly speaking, not accurate. The equivalent to ‘freelancer’ in German is actually ‘Freier Mitarbeiter’ – a term also used to mean independent consultant or contractor.
If you’re a ‘freelancer’ in Germany, this refers not to your business type but to the nature of your professional relationships with clients (i.e., the capacity in which you’re hired).
Roughly speaking, 'freelancing' means you’re not working as a permanent employee (with salary, healthcare, etc.).
Instead, you work on jobs for different companies, mostly for a limited time. You can still be one of two self-employed business types: Freiberufler or Gewerbe, two legally distinct classifications.
With that cleared up, let’s dive into the difference between Freiberufler and Gewerbe.
Freiberufler include those who are self-employed in a:
In Germany, each of these activities (or occupations) has a legal definition. The Finanzamt (tax office) uses these definitions to determine which business type you are (Freiberufler or Gewerbe) and consequently what taxes you’ll pay. So, how does this work exactly? By establishing a category of jobs classified as 'liberal professions'.
Technically speaking, a Freiberufler is someone who practices a ‘liberal profession’. In fact,
This is where the term Freiberufler comes from, literally: ‘Freie’ means 'free' (or liberal), and ‘Berufe’ means 'profession'.
Liberal professions are listed in Section 18 of the Income Tax Act. The official act is only provided in German, but you can use Google Translate to read it in English. You can also find a full breakdown of liberal professions on the Government’s site here (again, simply translate to take in the knowledge).
Liberal professions are themselves broken down into categories, including catalogue occupations and similar occupations.
Catalogue occupations include:
To sum up, practicing any of these catalogue occupations makes you a Freiberufler.
Checklist for liberal professions!You can find a practical checklist for liberal professions on the Government’s website. Just one catch: it’s in German. Time to be extra nice to your German-speaking friends! |
The liberal professions also include a number of ‘similar occupations’. For your job to qualify as a similar occupation, your training and specific professional activity must be comparable to a catalogue job. In other words, if you need a permit from the health department to practice a catalogue job (for example, occupational therapist), you’ll also need it for a similar job.
It’s often assumed that being a Freiberufler is better than being a Gewerbe, but this isn’t automatically true. It all depends on what you do. That said, being a Freiberufler has its perks.
All self-employed professions not classified as liberal professions are considered Gewerbe (business/commercial professions), and anyone who works them is considered a Gewerbetreibender, or (sole) trader. A trader’s business is often referred to as a ‘commercial enterprise’.
Gewerbe pay trade tax (Gewerbesteuer) in Germany, unless they make less than €24,500 per year. Freiberufler are exempt from trade tax. Trade tax is paid to the trader’s municipality.
There are some useful benefits to being classified as a Gewerbe, but the main advantage is ongoing support from IHK.
IHKs offer a range of consultancy services and seminars for members. They also provide advice on starting your own business, all in English!
Think you’re a trader?Read this article to learn all about how the IHK can help your commercial enterprise succeed. |
The distinction between Freiberufler and Gewerbe isn’t always black and white. For example, a DJ in Berlin can be considered a Freiberufler if they compose original music; but if they’re famous for playing 80s hits at weddings, they’d be classified as a trader... Weird, right? This gets especially messy when the tax office has the final say on which roles contain, in this instance, artistic merit – at least from a taxation point of view.
The good news?
While the tax office ultimately decides whether your activity is liberal or commercial, you can always appeal decisions and present your case.
Why are the so-called liberal professions treated differently? Good question. The laws were created on the assumption that commercial enterprises, such as a construction company, use the local infrastructure more intensively than, for example, a lawyer or a journalist.
The trade tax is a profit-related tax that traders pay to their municipality. It differs depending on the region and is used to maintain local infrastructure.
It’s a reasonable question. After all, DJs who mix other people’s music don’t use roads and train stations any more than composers. New job profiles are emerging every day, and traditional training paths are becoming less and less important, so the division of the self-employed into two classifications seems outdated.
Financially, though, there’s no significant difference between Freiberufler and Gewerbe.
Traders pay trade tax, but this is offset against a lower income tax liability.
Whether you’re a Freiberufler or Gewerbe, you can qualify as a ‘small business owner’, or Kleinunternehmer. This is another legal classification that affects your taxes.
If your turnover in the first year of operation was no higher than €22,000 and will not exceed €50,000 in following years (for a period of 5 years), you’re eligible to become a Kleinunternehmer and don't need to include VAT (Umsatzsteuer – USt) on your invoices. However, this also means you’re not allowed to deduct VAT paid from business expenses.
Note – Careful what you sign up forBy signing up as a small business owner, you lock yourself into this decision for 5 years. It goes without saying, anything lasting 5 years should not be taken lightly. Consult with a tax advisor to decide if it makes sense for you to operate as a small business owner. |
As early as the start-up phase, you should be clear about whether your business activity will be classified as Freie Berufe or Gewerbe. Discuss the topic with your tax advisor or research until you’re certain and fill out the tax registration questionnaire yourself. That way you avoid disputes and back payments, and start off on the right track.
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German |
English |
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Finanzamt |
Tax office |
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Freiberufler |
Practitioner of a liberal profession |
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Freie Berufe |
Liberal professions |
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Freier Mitarbeiter |
Freelancer / contractors |
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Gewerbe |
Trade (commercial activity) |
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Gewerbeamt |
Trade office |
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Gewerbetreibende |
Trader |
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Gewerbeanmeldung |
Trade registration |
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Gewerbesteuer |
Trade tax |
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IHK (Industrie-und Handelskammer) |
Chamber of Industry and Commerce |
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Kleinunternehmer |
Small business owner |
Want to learn more about freelancing as an expat in Germany?We hope this article helps you understand the difference between Freiberufler and Gewerbetreibender, and what this means for your taxes as a self-employed person in Germany. If you want to explore more expat questions, check out:
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