Freiberufler or Gewerbe: what's the difference?

Freiberufler or Gewerbe: what's the difference?

Learn the differences between being a freelancer (Freiberufler) and a tradesman (Gewerbetreibende). It's not as easy as it seems!

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In Germany, there is a legal difference between a freelancer (Freiberufler) and a tradesperson (Gewerbetreibende). If you are starting a business in Germany, you need to understand this difference.

There are three types of businesses you need to know about:

  • Kleinunternehmer (small business): a Gewerbe or Freiberufler with a low revenue
  • Freiberufler (freelancer): a freelance professional selling his or her services
  • Gewerbe/Gewerbetreibende (trade/tradesperson): a business, or a freelancer with a common job

The Finanzamt will decide which one you are when you submit the Fragebogen zur steuerlichen Erfassung.

Kleinunternehmer

A small business (Kleinunternehmer) is a Freiberufler or Gewerbe with a revenue of less than 17 500€ in the first year, and a revenue of less than 50 000€ in the following years1,2. Note that we wrote revenue, not profit. The law that defines small businesses is called the Kleinunternehmerregelung.

The main benefit of being a Kleinunternehmer is that you don't need to charge VAT to your customers1.

Freiberufler (freelancer)

In Germany, this title is for self-employed professionals with special qualifications who sell their services. Self-employed doctors, lawyers, accountants, engineers, IT professionals and architects are usually Freiberufler1, 2. Common jobs like food delivery driver or tour guide do not qualify as Freiberufler.

There are a few benefits to being a freelancer:

  • You do not need to register in the Handelsregister, the German Trade Register1.
  • You do not need a Gewerbeschein (trade licence)
  • You do not need to pay the Gewerbesteuer (trade tax)12.
  • You do not need to use double entry bookkeeping1.

The Finanzamt will decide if you are a Freiberufler when you submit the Fragebogen zur steuerlichen Erfassung.

Gewerbe (trade)

If you are self-employed but you are not a Freiberufer, 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:

  • They must register in the Handelsregister, the German Trade Register.
  • They must apply for a Gewerbeschein (trade licence) and pay the Gewerbesteuer (trade tax).
  • They must use double entry bookkeeping.

Special rules for small businesses

Small businesses (Kleinunternehmer) do not need to register in the Handelsregister, and they do not need to use double entry bookkeeping1. This makes things much easier for them. However, they still need to obtain a Gewerbeschein (trade licence) and pay the Gewerbesteuer (trade tax)12.

Small businesses do not need to charge VAT, but they can do so voluntarily1. Not charging VAT saves you a lot of work, but it prevents you from claiming VAT refunds. See this guide to understand the pros and cons of not charging VAT.

The Handelsregister (trade register)

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All businesses except small businesses and freelancers must be listed in the Handelsregister, the German Trade Register.

Small businesses are not required to be listed in the Handelsregister1, but they can do so voluntarily. This has some benefits, but it comes with lots of fees and responsibilities1. For most small businesses, it's not worth it.

You can request an entry in the Handelsregister when filling the Fragebogen zur steuerlichen Erfassung.

The Gewerbeanmeldung (business registration)

You must register your Gewerbe with the city's Gewerbeamt1 and obtain a Gewerbeschein. This process is called the Gewerbeanmeldung. Small businesses (Kleinunternehmer) are not exempt from this1.

In Berlin, the Gewerbeanmeldung can be done online, and costs 15 to 26 euros.

The Gewerbesteuer (trade tax)

All businesses must pay the Gewerbesteuer1,2, unless they make less than 24 500€ in profit per year. See this guide for a detailed explanation of the trade tax.

Small businesses (Kleinunternehmer) are not exempt from the trade tax1.

Double entry bookkeeping

Gewerbe that generate more than 60 000€ in profit or more than 600 000€ in revenue and that are listed in the Handelsregister must use double entry bookkeeping123.

See this guide or this guide for an explanation of what double entry bookkeeping is. In essence, it's a lot more work, but it makes sense for larger businesses with a lot of customers and suppliers.

Small businesses (Kleinunternehmer) don't need to use double entry bookkeeping, since they have a lower revenue and are not listed in the Handelsregister.

You can also request an exemption from double entry bookkeeping under §148 AOende : The revenue authorities may in individual cases or for certain groups of cases authorise simplifications where adherence to the accounting, recording and storage duties set out in the tax laws causes undue hardship and where taxation is not hampered by the simplifications.

If you think this applies to you, ask a tax advisor about it.

Still need help?

If you still have questions about starting a business in Germany, ask one of our English-speaking tax advisors.

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