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Employed and Self-employed StatusImportant: If you are self-employed but you are not a freelancer, then you are a Gewerbetreibende (tradesperson). Websites and businesses that sell physical products are definitely in this category. Independent delivery and call centre employees must also apply as a Gewerbe, since they don't qualify as freelancers. Compared to freelancers, businesses have a few special obligations:
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Option 1: Self-employed - Small Businsess
The Kleinunternehmerregelung (a typical long, bureaucratic German word, isn’t it?) is an amendment to German tax law. It basically states that self-employed entrepreneurs have the option of not taxing their customers. Therefore, they can declare everything on the respective invoices as net sums without adding any tax. In other words, the self-emloyed income remains free from VAT tax. It also means that it will exclude you from any sort of VAT refund. Entrepreneurs can apply this option if they fulfill both the following two requirements:
– revenue generated last year: €17.500 as of 2020 € 22.500 – revenue for the current year: €50.000 |
Option 2: Self-employed - Regular
The most important difference to the "Small Business" is that you can tax your services. If you refuse from applying Kleinunter-nehmerregelung, you are entitled to receive a VAT tax refund on items you acquire for your own business. It also means that you would need to declare you VAT in regular time periods.
It is not possible to switch between opting for or against this rule with every bill that you write. Once you decided to refuse, you are bound to your decision for five years. |
