Finance

What Are The Top Business Expenses For Freelancers in Germany

Are you a freelancer or self-employed in Germany and need to file your taxes soon? Learn about your top business expenses for freelancers in Germany. 

 

Now that you have educated yourself about registering yourself as a freelancer in Germany, now it is time to learn about other basics of your day to day business – such as German tax returns. Tax-deductible or business expenses are one of the best things about running a business.

According to Inc.com tax-deductible expenses are almost any ordinary, necessary, and reasonable expenses that help to earn business income. Business expenses are also deductible and are always netted against your business income.

 

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It is important to know how expenses influence your profit and your tax burden. In brief, valid business expenses reduce your profit and consequently allow you to pay fewer taxes. All business, especially small businesses should track their expenses to properly capture all the deductions when filing business taxes.

Whether you file your own tax return or use services of a tax consultant in Germany, you should save every business-related receipt so it could be used for business expenses.

 



 

Which Business Expenses are Tax-Deductible in Germany?

 

You can deduct all business-related costs:

  • Office or Home Office Costs
  • Office Electronics – All electronic gadgets, laptop, router, camera, business phone etc.
  • Travel Costs – If you travel to your client’s office for onsite project
  • Accommodation – Cost of hotel/ AirBnB when you are working on-site away from home
  • Pension Plan Contributions
  • Healthcare, liability and accident insurance contributions
  • Business Tools – Any software including online tax filing tools or accounting software, marketing, design, editing or other software depending on your line of work
  • Advertising costs – Online or Print or other media
  • Business Utilities – Mobile phone, Internet bills, other monthly subscriptions
  • Costs for business dinner – If you decide to take your client our for coffee or dinner
  • Interest payments for an operational credit etc.
  • Costs related to work visa processing – Various fees, or costs of public transport tickets
  • Personnel costs – Any of your full- part-time employees, or independent contractors, Fees of your Tax consultant
  • Training – Includes professional training for advanced skills, refresher courses, coaching etc
  • Other costs – Resume audit or writing service, business website development, writer for your business websites, business portraits that don’t fit in other categories.

 



Office or Home Office Costs as Business Expense

 

Even if you do not go to the regular workplace, you still require a designated spot to give you that office like feel. Maybe you are renting a desk at a coworking hub or using one of the rooms in your home as an office. Good news is that you can deduct the rent and utilities that go toward the cost of the office. But there are a few conditions.

A room in your home is recognised as a home office only when it is

  1. A separate room surrounded by walls and a door: which mean the workspace in the corner of your living room, does not qualify as a home office. Same goes for any workspace set up in a hallway which connects other rooms.
  2. Used exclusively as the home office – So you can rule out the guest room or baby room used as a makeshift office.

So before deducting your home office expenses, you have to make sure that it legally qualifies as a home office in the first place. The above conditions do not apply to commercial office spaces that you can rent on a monthly or weekly basis.

 



 

Costs like rent, water, insurances can be partially deducted (size of the home office in proportion to the total size of the flat). Divisible costs are:

  • Depreciation or rent
  • Interest payments for a credit
  • Repair costs
  • Costs for electricity, water, heating
  • Waste collection
  • Property tax
  • Costs for furnishing the home office
  • Costs which exclusively come up for the home office e.g. renovation of a home office, are fully deductible

 


Also Read: How to set up a home office in Germany


 

Flat-Rate Business Expenses (Betriebsausgabenpauschale)

 

For some self-employed people or freelancers, it is possible to apply a flat rate for operating expenses instead of all costs incurred. Expenditure can be deducted without the need to provide proof or vouchers. The flat rate for operating expenses may be taken into account for the following activities:

  • Full-time self-employed writing or journalistic work
  • A scientific, artistic and literary part-time activity
  • Part-time teachers
  • Midwives and
  • Nannies

To apply for the ‘flat-rate business expenses’ in Germany it is important to determine whether the freelancer works full-time or part-time.

In the case of full-time self-employed writers or journalists, the lump-sum deduction is 30% of the business income from this activity, but no more than 2,455 € per year.

In the case of scientific, artistic or literary part-time employment (including lecturing or part-time teaching), the flat-rate deduction amounts to 25%of the business income from this activity, but no more than 614 € per year.

As a self-employed midwife an amount of 25%, max. 1.535€, of the operating income, is deductible as operating expenses. For a self-employed nanny, 300€ per month per child who is looked after full-time (40 hours per week) can be set as business expenses.

 


Read more: How to effortlessly do expat taxes in Germany (without hiring a tax advisor)


 

 

How to Track Business Expenses For Freelancer in Germany

 

A much quicker and easier way to track your business expenses is through a dedicated freelancers tax filing tool such as Sorted. Sorted can guide you through adding your income and expenses and automatically prepares your tax reports with that data.

The Sorted UI uses very simple English which makes it extremely helpful for expat freelancers who are uncomfortable with complicated legal or finance german terminologies.

You don’t even need an Elster certificate to file freelance taxes in Germany – Sorted sends the VAT return directly to the tax office. In addition, you can manage all your invoices and expenses in one place and have an overview of your business finances at all times.

Freelancers registered as kleinunternehmer can use this tool for FREEYou only need a paid account when you charge VAT to your clients.

 


Click here to sign up with Sorted and submit your freelancer taxes easy peasy in ENGLISH


 

 

Do you do your taxes yourself? Or did you end up hiring an accountant like me? Did I miss any business expenses for freelancers in Germany in this list? Let us know your experiences with German taxation in comments below!

 

Business Expenses For Freelancers in Germany

Hi there, I am the human behind this blog. If you could not tell by my photo, I am fueled by tea. My expat journey started at the age of 19. Germany has been my home for several years. I hope you will find some helpful insights if you are considering moving to Germany or already live here.

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