Dummy’s Guide to Filing German Freelancer Taxes (in 2023)
Last updated on January 23rd, 2023 at 02:06 pm
Read this fool-proof beginner’s friendly guide to German freelancer taxes and how to file your German annual tax return (yourself using tools or through a tax advisor!)
Taxes in a foreign country and language is not everyone’s cup of tea. As an expat you may find the tax system too complicated, and too difficult to manage by yourself. If you are freelancing in Germany you should have some background knowledge of the German tax system.
Headsup: This guide to German freelancer taxes is simple, but also long and boring. However, as a great man called Littlefinger famously said “Knowledge is Power” ;), it is worth informing yourself about taxes in Germany and saving a lot of frustration and confusion in the long term. I speak from personal experience!
German Tax Deadlines for 2022 and 2021
NOTE: The annual reports for 2021 should be submitted by 31/10/2022.
The German tax year runs from January to December. If you are obligated to submit a German annual tax return, you can submit it any time between January 1 and July 31 the following year.
For instance, annual reports for the last financial year should be submitted by July 31st.
However, this is subject to change and is notified. the German tax return deadline for 2021 is October 31, 2022. This applies to both salaried and self-employed taxpayers.
The table below shows the important German tax deadlines in 2022 for filing taxes in Germany.
VAT (Monthly) | VAT (Quarterly) | Income Tax (Quarterly) | Annual Tax Return |
10th January | 10th January | ||
10th February | |||
10th March | 10th March | ||
10th April | 10th April | ||
10th May | |||
10th June | 10th June | ||
10th July | 10th July | ||
10th August | |||
10th September | 10th September | ||
10th October | 10th October | 31st October | |
10th November | |||
10th December | 10th December |
1) Prepare and File German Taxes as a Freelancer
Freelancers in Germany pay taxes throughout the year. The schedule and amount can change each year. Finanzamt informs freelancers about the changes through the post. This is why it is important to pay attention to every letter from Finanzamt.
The following German freelancer taxes apply to anyone registered as a freelancer in Germany:
- VAT (Umsatzsteuer)
- Income Tax (Einkomensteuer)
1.1) VAT (Umsatzsteuer)
Value-added tax (Umsatzsteuer or Mehrwertsteuer) in German, is a tax placed on products and services. Usually, every business or self-employed person must pay VAT. The only exception to this is when you are registered as a small business owner (Kleinunternehmer).
VAT is charged at 19% in Germany. Some reductions apply to certain products and services at 7%.
Freelancers in Germany report VAT by filing Advance VAT Return or Umsatzsteuervoranmeldung (Umsatz-steuer-vor-anmeldung).
Umsatzsteuervoranmeldung (UStVA) is the process of periodically reporting your incoming and outgoing VAT to your responsible Finanzamt.
Freelancers in Germany have to send Umsatzsteuervoranmeldung to their local tax office on a monthly or quarterly basis. Whether a monthly or quarterly reporting applies to you depends on how much VAT you had to pay the previous year:
- over 1,000 Euros VAT – quarterly advance VAT return declarations
- over 7,500 Euro VAT – monthly advance VAT return declarations
You calculate VAT earned – VAT spent = VAT to be paid to the Finanzamt.
If there is a negative value, i.e. you spent more VAT than you earned, you will be reimbursed by the tax office.
Monthly reporting: The advance VAT return must be submitted to the tax office by the 10th day of the following month. For example, February 10 for January.
Quarterly reporting: The filing and payment date is then the 10th day after the end of the quarter. For example, April 10 for the first quarter of a year.
There are three ways to file advance VAT return as a freelancer in Germany:
- Yourself for free via ELSTER in German.
- Yourself with paid tools such as SevDesk or LexOffice in English.
- Hire and pay a German tax consultant. English speaking Steuerberaters are available on MyGermanXpert.
1.2) Income Tax (Einkommensteuer)
Everyone in Germany has to pay this tax to support social security systems.
Salaried people in Germany pay income tax on their salary every month,
Freelancers and sole traders pay their income tax with quarterly prepayments and a final payment at end of the financial year.
Freelancers in Germany have to transfer the quarterly prepayments to the tax office. This is called Einkommensteuervorauszahlung (Einkommen-steuer-vor-aus-zahlung).
In the first year of freelancing in Germany, this amount depends on your information in the tax office questionnaire. When you register as a freelancer in Germany, you have to provide the estimations for your expected yearly income to the Finanzamt, and they determine the prepayments based on those figures.
If you have been freelancing in Germany for over a year, then the amount of the advance payments are calculated based on your total income from the previous year.
The deadlines for these advance tax payments are:
- 10 March,
- 10 June,
- 10 September
- 10 December
After submitting your annual income tax declaration (explained below), you will either pay the Finanzamt or get reimbursed for the difference between the prepayments and the final income tax amount.
You can set up a SEPA direct debit with Finanzamt to automate these payments or make a bank transfer before the payment deadlines.
2) Prepare and File German Annual Tax Return as a Freelancer
Sometimes you end up paying too much freelancer taxes in quarterly tax payments. With a German annual tax return, you can claim your expenses and even get a refund. In order to find this out, you have to provide the tax office with several pieces of information.
Freelancers in Germany file the following reports to Finanzamt for their annual income tax return:
- Annual VAT Return
- Profit and Loss Statement
- Income Tax Return
2.1) Annual VAT Return (Umsatzsteuererklärung)
Annual VAT Return or Umsatzsteuererklärung is the FIRST report in your German annual tax return.
Umsatzsteuererklärung (Umsatz-steuer-erklärung) is a summary of the VAT you have paid and received during the year.
STEP 1
Add up all the VAT earned on your annual income from various sources. This includes:
- 19% VAT
- 7% VAT
- Other VAT rates
- Reverse Charge for services purchased
STEP 2
Subtract it with VAT paid on:
- Business expenses
- Reverse Charge deduction for services purchased
All annual tax reports in Germany must be submitted by the end of July of the next financial year.
E.g: Annual tax reports for the financial year 2021 should be submitted by 31/07/2022.
There are three ways to file Umsatzsteuererklärung as a freelancer in Germany:
- Yourself for free via ELSTER in German. It is called Anlage UR in ELSTER forms.
- Yourself with paid tools such as Sorted in English
- Hire and pay a German tax consultant. English speaking Steuerberaters are available on MyGermanXpert.
2.2) Profit and Loss Statement (EÜR)
A Profit and Loss Statement or EÜR is the SECOND report in your German annual tax return.
EÜR (Einnahmen-überschuss-rechnung) is a summary of your annual income and expenses. It is used for calculating profit or loss. If your income is higher than your expenses the EÜR will show a profit and vice versa it will reveal a loss.
STEP 1
Add up ALL your actual income for the financial year. E.g:
- Income subject to VAT
- Income not subject to VAT
- VAT collected from customers
STEP 2
Deduct ALL your actual business expenses for the financial year from the total income.
- Business-related expenses. E.g: Advertising, communication, contractors, home office, work-related insurances, legal fee, software licences, office tools etc. Check the full list of business deductibles here.
- VAT paid on expenses
- VAT paid to the tax office
NOTE 1: EÜR is calculated based on actual cash flow, i.e. the date on which you received or sent the payment. E.g: if you sent an invoice in November 2021, and you received the payment from your client on the 1st of January 2022, the income should be added to the 2022 EÜR report (NOT 2021!).
NOTE 2: If you received or paid back any governmental Corona aid, you should record it as income or expense accordingly.
All annual tax reports in Germany must be submitted by the end of July of the next financial year.
E.g: Annual tax reports for the financial year 2021 should be submitted by 31/07/2022.
There are three ways to file EÜR as a freelancer in Germany:
- Yourself for free via ELSTER in German. It is called Anlage EÜR in ELSTER.
- Yourself with paid tools such as Accountable (English) or SevDesk (German/English)
- Hire and pay a German tax consultant. English-speaking Steuerberaters are available on MyGermanXpert.
2.3) Income Tax Return (Einkommensteuererklärung)
Income Tax Return or Einkommensteuererklärung is the THIRD and FINAL report in your German annual tax return.
In an Einkommensteuererklärung (Einkommen-steuer-erklärung) you report any additional income such as salary or investments and your contributions to health insurance, pension, or any other special expenses. This information is used by Finanzamt to estimate your income tax.
You can prepare your Einkommensteuererklärung reporting any additional income such as salary or investments and your contributions to health insurance, pension, or any other special expenses.
All annual tax reports in Germany must be submitted by the end of July of the next financial year.
E.g: Annual tax reports for the financial year 2021 should be submitted by 31/07/2022.
There are three ways to file Einkommensteuererklärung as a freelancer in Germany:
- Yourself for free via ELSTER in German. It is called Anlage S in ELSTER.
- Yourself with paid tools such as Accountable or Sorted in English
- Hire and pay a German tax consultant. English speaking Steuerberaters are available on MyGermanXpert.
Estimate the amount of your German income tax payment or refund?
You can calculate the estimated income tax payment or return in two steps.
Step 1: Calculate your taxable income
Your taxable income is the total income you earned during the year minus your deductible personal expenses.
- Add up ALL incomes
- Income from self-employment
- Income as an employee (if applicable)
- Any other income (investments, earnings from abroad, rent from properties etc)
- Unemployment benefits (ALG 1)
- Deduct ALL personal expenses
- Health insurance (private or public)
- Other insurances (accident, personal liability, life insurance etc)
- Pension funds
- Flat rate employee expenses (if applicable)
- Child care expenses (if applicable)
Now you should be left with your total taxable income of the year. Apply the applicable tax rate to this amount. The amount is your income tax payment.
Step 2: Calculate your tax payment or return
This amount depends on your income tax payment and any taxes that you already paid to Finanzamt. To calculate this:
- Aggregate all the quarterly taxes you paid to Finanzamt in the year. These payments are called Einkommensteuervorauszahlung.
- Deduct the income tax payment you calculated in Step 1.
The remaining amount you are left with is the amount you get back from or pay to Finanzamt in taxes.
You can also use this simple calculator by MyStartUp Germany
Other (Very detailed!) Guides about German Freelancer Taxes
How to file German Freelancer Taxes Yourself (using online tax filing tool)
A Guide to German Freelance Tax IDs
A Guide to Tax Reports for Freelancers in Germany
When and How to Hire a Tax Consultant in Germany
A Guide to VAT for freelancers in Germany