Important Obligations

Who is self-employed and why obligations matter

You're self-employed if you work on your own account, bear your own risk and decide freely about your time and tasks, without instructions from others. If you know your obligations, you can fulfil them and thus protect yourself from penalties and ensure planning security.

First steps: your registration

→ See also our guide Registering self-employment

You start self-employment correctly if you register on time and correctly. The tax office needs your data within one month of your first order. Without registration you face reminder fees.

Freelance or trade?

Freelancers (freiberufler, liberal profession) according to §18 EStG (e.g. consulting, creative work or medical professions) only register their self-employed activity with the tax office and pay no Gewerbesteuer (municipal tax). Traders (e.g. in commerce or services) register with the trade office and are subject to municipal tax liability. The tax office will classify you in case of doubt ^[1].

Registration with the tax office

Every self-employed person sends the Fragebogen zur steuerlichen Erfassung (questionnaire for tax registration) via ELSTER to the tax office: provide your activity, address and expected sales and profits. You'll receive your Steuernummer (tax number) and possibly a Umsatzsteuer-Identifikationsnummer (VAT identification number). Only with these may you issue invoices and benefit from Vorsteuerabzug (VAT reclaim) ^[2].

Trade registration

Traders must go to their local trade office at the start of their business. The Gewerbeanmeldung (trade registration) costs approx. €20–60. This automatically notifies the tax office, the Berufsgenossenschaft (statutory accident insurer) and the IHK/HWK.

Tax obligations at a glance

Taxes are no mystery if you're well organised from the start. Annual returns are mandatory and advance payments increase with your income.

Income tax

→ See also our guide First tax return

You always file an Einkommensteuer (income tax) return, even with small sales. The basis for this is the Einnahmen-Überschuss-Rechnung (income-surplus statement) (EÜR): income minus expenses. The tax office may require quarterly Vorauszahlungen (advance tax payments).

VAT Obligations

→ See also our guide VAT

For the vast majority of goods and services in Germany, standard taxation applies: you show 19% Umsatzsteuer (VAT, value-added tax) on invoices. You can also deduct Vorsteuer (reclaimable VAT) when you purchase goods and services. An annual VAT return is mandatory and depending on the expected taxes, usually monthly or quarterly Voranmeldungen (advance VAT returns).

An exception is the Kleinunternehmerregelung (small business exemption). If your turnover was below €25,001 in the previous year and below €100,001 in the current year (thresholds from 2026), you don't have to show VAT, but you're also not entitled to VAT reclaim. This is often ideal for starters ^[3].

Municipal tax

Freelancers pay no municipal tax.

Traders pay Gewerbesteuer (municipal tax) if they exceed the allowance of €24,500 profit per year. The municipal tax is credited against income tax and is often lower than you might initially think ^[4].

Invoices and bookkeeping

Correct invoices and receipts are essential. Without receipts you can't deduct anything from tax.

Issuing invoices

Every invoice issued must include:

• Your name and address
• Name and address of the recipient
• Your tax number and VAT identification number
• The date of invoicing
• The date of service provision / delivery
• A consecutive invoice number
• A service description
• Any agreed price reductions and discounts
• The amount payable (the consideration) or the net price
• The applicable tax rate (usually 19% or 7%) or a reference to the use of the small business exemption
• The payable VAT amount

Bookkeeping and retention

Keep orderly records (income-surplus statement is sufficient for solo businesses). Keep receipts, contracts and invoices for 10 years – digitally or physically ^[6].

Insurance

Without protection you sometimes risk everything. Start with mandatory insurance and supplement sensibly.

Health and long-term care insurance

→ See also our guide Health insurance for self-employed individuals

Health and long-term care insurance are mandatory for everyone in Germany! Choose between statutory (approx. 14–16% of profit) or private health insurance. Long-term care insurance is added and is higher if you have no children.

Register with the health insurance fund of your choice as soon as possible once your social security status changes. The registration deadline is a maximum of three months.

Pension insurance

Pension insurance is voluntary for most people and mandatory for some professions such as midwives, artists or self-employed teachers. Here too there is a registration obligation within 3 months.

→ See also our guide Retirement provision for self-employed individuals

Other insurance

For some liberal professions, professional liability insurance is mandatory. The following professions are affected ^[7]:

• Architects and engineers
• Doctors and pharmacists
• Lawyers and notaries
• Tax advisors
• Insurance brokers / investment brokers
• Property managers
• Auditors
• Energy consultants

Beyond this, other insurance policies are often sensible (e.g. legal protection insurance, cyber insurance, business liability, unemployment insurance), but not mandatory.

Artists' Social Insurance Fund (KSK) for creative professionals

Artists, journalists or authors (and other artistically or journalistically working self-employed individuals) are mandatorily insured through the Künstlersozialkasse (Artists' Social Insurance Fund) (KSK). They pay 50% of contributions into health insurance, long-term care insurance and pension insurance like employees, while the KSK bears the other half.

→ See also our guide The Artists' Social Insurance Fund (KSK)

Statutory accident insurer (BG)

The Berufsgenossenschaft (statutory accident insurer) (BG) provides occupational accident insurance in Germany. If you're an employer yourself, you must insure your employees through the BG. You can usually exempt yourself and thus potentially save money, but also increase your risk.

Contact your industry BG for more information (e.g. BGHW for office workers). The economic focus of your business determines which BG is responsible for you.

Chambers

Traders must be members of the Chamber of Industry and Commerce or the Chamber of Crafts (here there's often an exemption from fees for small turnover). During trade registration it's also determined which chamber is responsible for you.

Liberal professions are generally exempt from chamber membership, but for the so-called chamber-eligible liberal professions there's a chamber obligation in Germany ^[8]:

• Doctors, pharmacists, architects, consulting engineers, notaries, patent attorneys, psychotherapists, lawyers, tax advisors, veterinarians, auditors and dentists

GDPR Data Protection

The GDPR is the European General Data Protection Regulation and regulates the protection of personal data within the EU. It applies to everyone and brings some rules for you as a self-employed person. Specifically relevant for you is the processing of customer data.

Names, addresses, birth dates, bank details and much more are personal data and may fundamentally not be processed and used.

The following reasons permit processing ^[9]:

• Fulfilment of a contract: Contact data is collected for contract initiation.
• Legal obligation: Account data must be stored to comply with bookkeeping obligations.
• Legitimate interest: Anonymous tracking on the website to improve marketing.
• Consent of the data subject: If none of the other reasons apply.

You definitely need a privacy policy if you're reachable via a contact form, as well as an imprint for your website.

If you violate the GDPR, fines of up to €20 million or 4% of annual turnover may be imposed depending on the offence.

Self-employment as a side business

Even if you're self-employed as a side business, you must register your self-employment with the tax office and possibly with the trade office. Also report all side business income to your health insurance fund and have your health insurance fund check what your main income is. This way you'll avoid problems with your pension insurance obligation early on.

Furthermore, it's usually stipulated in the employment contract that side activities must be reported to the employer. However, you're not legally obliged to do so. The employer can only prohibit this side activity in exceptional cases (e.g. violation of the Working Time Act, competition with the employer's company or if your performance at work declines).