Holvi Blog for Makers and Doers

What to do when the IHK sends you a letter (2020)

Business tips, Sole trader expenses, Sole trader taxes · 01/10/20 08:30 · Daniel McLeod

Getting a letter in the post can be a beautiful thing. An event that instantly transports you back to simpler times. Days when you still noticed the sunshine, the changing seasons, felt a flutter of excitement at the prospect of travel (or simply running into someone on the street). The pre-screen era, long before 2020.

But when a letter from the IHK drops into your mailbox, it can be a cause of confusion. You might be asking:

What is the IHK, anyway? 

Do I have to become a member of the IHK? 

Why has the IHK sent me this letter? 

Do I have to pay this fee?

 

What is the IHK, anyway?

The IHK stands for Industrie-und Handelskammer, or Chamber of Industry and Commerce. The IHK is a self-regulatory organisation regulating German industry and trade. Its purpose is to promote trade and lobby for trade rights within Germany. 

How can the IHK help me as a Gewerbe?

Each municipality has its own IHK. Your business address determines which one you join. IHKs offer a range of consultancy services and seminars for members. They also provide advice on starting your own business.

For certain professions – for example, in the taxi or car rental sector or hotel industry – they offer certification exams required to obtain a license. 

 

Tip: Google ‘IHK setting up a business in [insert your German state]’

Most IHKs have created handy business start-up guides to help your Gewerbe succeed.

 

 

Do I have to become a member of the IHK?

All companies in Germany (with the exception of skilled crafts, the so-called liberal professions and farmers) must become members of the IHK. As someone who’s self-employed, whether you have to join the IHK depends entirely on your business type.

When it comes to self-employment, for tax purposes there are two business types in Germany:

  • Gewerbe (sole proprietorship – or sole trader/trader)
  • Freiberufler (freelancer)

 

Note: There is a further distinction – but not a legal one – between Freiberufler and Freelancer. 

 

But quickly…

If you’re a Gewerbe (trader), you’re obliged to pay Gewerbesteuer (trade tax) and membership in the IHK is mandatory. 

If you’re a Freiberufler (roughly speaking, a freelancer), you’re exempt from paying Gewerbesteuer and membership in the IHK is not required.

Even so...

If you’re a Freiberufler, you might get this IHK letter in the mail. How come?

 

Why has the IHK sent me his letter?

Germany has a reputation for efficiency. Once you register your self-employment in Germany by filling out the Questionnaire for Tax Registration (Fragebogen zur steuerliche Erfassung), the Finanzamt (tax office) knows where you are right away.

Based on your business activity, you might be required to register a Gewerbe. Once you do this, the Finanzamt will notify your municipality’s IHK, and you’ll receive a letter in the post.

But sometimes, even if you haven’t registered a Gewerbe, the self-employed still get this letter. This happens when the Finanzamt believes that your freelancing activity is in fact not really freelancing.

Sometimes there’s no clean line, and unfortunately the tax authorities have the ultimate power to define whether your activity is in fact freelancing or not. 

 

For example: Graphic designer vs web designer

If you’re a graphic designer, you automatically qualify as a Freiberufler, and you don’t have to pay Gewerbesteuer or fees to the IHK. As a web designer, however, you might not always be operating within the criteria of free professions anymore. This is when you get a letter from the IHK.

 

CM_Blog_Content_IHKvsFreelancer_EN_1516x794

 

Do I have to pay this fee?

The best way to find out what’s going on is just to ask your local tax authorities – ideally, before you start your freelancing career. Does it make sense to register a Gewerbe in your case? Your local tax authorities will tell you. 

Once you get the letter, if you disagree with the decision, you can provide the tax authorities and/or the IHK with documents proving them wrong. It’s worth it to fight for your position as a freelancer, as you save money (no trade tax, no IHK membership fees) and have more freedom (no double-entry bookkeeping!). 

Often, explaining that you are, in fact, a freelancer and not required to register a Gewerbe is enough to get the decision reversed.

Don’t shut your eyes and pretend it’ll go away

The last thing you should do is to just ignore the letter. Once the bill has been sent it requires action on your part to settle it, either by paying or challenging it. If you don’t respond, the costs will grow. German bureaucracy can be a powerful enemy! Make sure you settle cases like these, or quicker than you can say Einkommensteueridentifikationsnummer you’ll have them hot on your trail.

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