Because freelancers are not Solar Staff's employees and we don't pay taxes on their payouts, they must declare any income received via Solar Staff by themselves.
To carry on tax accounting in Germany for your Solar Staff income, you need to:
Be a tax resident
Have a tax ID number
Determine the applicable tax obligations
Tax residence
Germany taxes its residents on their worldwide income, while non-residents are taxed on their German-source income only.
Individuals are deemed to be residents of Germany:
If they have a dwelling in Germany that they use, or that is available to them (either rented or owned), or
If they have a habitual abode in Germany (i.e., if the individual is physically present in Germany for more than six months in any one calendar year, or for a consecutive period of six months in a year)
Germany has double taxation treaties with a number of countries (full list), the provisions of which may override the applicable tax residence rules and other provisions of national legislation.
Tax ID number
The tax ID number (Steuerliche Identifikationsnummer / IdNr) is a tax identifier used for tax reporting and accounting. It is assigned to every individual whose primary or sole residence is in Germany or who is subject to tax liabilities in Germany. This number is issued once and consists of 11 digits.
The tax number (Steuernummer / StNr) is a tax identifier assigned to every individual or legal entity (regardless of their marital status or social group) who registers as a taxpayer in Germany. This number consists of 13 digits and can be issued multiple times depending on changes in the taxpayer's location and tax office or individual/joint tax payment arrangements.
The VAT identification number (Umsatzsteuer-Identifikationsnummer / UStIdNr) is a number assigned by the Federal Central Tax Office (Bundeszentralamt für Steuern) after the taxable person applies for it. This number is mandatory for taxpayers who are subject to VAT and those dealing with taxpayers from the EU member states (the latter applies to income received via Solar Staff).
Taxes and contributions payable by freelancers
Tax liabilities depend on the chosen tax status and/or eligibility for certain criteria. Germany has three tax status options for Solar Staff users to choose from:
Freelancer (Freiberufler)
Self-employed individual (Gewerbetreibender)
Sole proprietor (Einzelunternehmen)
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in Germany, but you can fill in your tax ID in your account.
All tax return filings and other tax-related matters are required to be administered through the ELSTER portal.
ELSTER (Elektronische Steuererklärung) is an electronic tax return system developed by the Federal Central Tax Office (Bundeszentralamt für Steuern) for paperless filing of tax returns without personal presence. To use ELSTER, taxpayers are required to register a personal account and obtain a digital signature (Zertifikatsdatei).
Read on for more details.
Freelancers
A freelancer (Freiberufler) is an individual engaged in one of the liberal professions (Freie Berufe) established by the Institute of Liberal Professions (Institut für Freie Berufe, IFB):
Lawyers, tax consultants, accountants
Engineers, architects
Doctors, dentists, veterinarians, psychologists
Journalists, translators/interpreters, writers, teachers
Artists, photographers, musicians, designers, actors
Registration as a freelancer involves several steps:
Obtaining an IdNr tax ID number from the Federal Central Tax Office (Bundeszentralamt für Steuern) (not required if the number was obtained earlier)
Filling in a tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) and indicating the taxpayer's tax ID number, bank and activity details
Obtaining the tax number (Steuernummer) within a few weeks
Freelances are not required to register as a legal entity nor require a special permit to carry out their activities.
Read on to learn more about freelancers' liabilities.
Income tax (Einkommensteuer) is charged using a progressive rate that varies depending on the income amount:
Up to EUR 10,908 – 0%
Between EUR 10,908 and EUR 62,809 – from 14 to 42%
Between EUR 62,809 and EUR 277,825 – 42%
From EUR 277,825 and above – 45%
Income tax deductions include expenses related to the taxpayer's activities and charitable and social security contributions.
Income tax returns are to be filed by taxpayers in the prescribed format and are due before July 31 of the year following the reporting year. However, if a tax return is prepared by a certified tax consultant, the deadline for submission is February 28 or February 29 of the second year following the reporting year. Upon completion of the tax return review, the tax authorities determine the final tax amount. The income tax due is to be paid within one month from the date when the final tax amount is charged to the taxpayer after the tax return review. Quarterly advance payments / prepayments (Einkommensteuer-Vorauszahlungen) are also due no later that March 10, June 10, September 10, and December 10 of the current year. Advance payments are to be calculated based on income for the previous year or an estimated income amount determined by the taxpayer.
The value-added tax (Umsatzsteuer) is charged at a rate of 19% if the freelancer's income exceeds EUR 22,000 in the first year of operation and EUR 50,000 in the second year of operation. If the income is below the specified amounts, the freelancer is considered a "small business" (Kleinunternehmer) and is not obligated to pay VAT. Those who have an obligation to pay VAT are required to have a VAT identification number (freelancers can obtain it when registering as such).
VAT is to be calculated based on the amounts paid for goods/services and be remitted to the tax authorities (this process is called Umsatzsteuer-Voranmeldung, or "advance VAT return"). An invoice to a foreign client may be issued without VAT, but only if it specifies the taxpayer's VAT identification number.
VAT reporting is to be completed by submitting advance returns online (learn more here) no later than the 10th day of the month following the reporting period, with the reporting frequency based on the amount of income tax payable:
Over EUR 7,500 per year – monthly
Less than EUR 7,500 per year – quarterly
Less than EUR 1,000 per year – after the end of the financial year
In the absence of income, it is still mandatory to file an advance VAT return indicating zero income.
In addition to filing an advance VAT return, freelancers are also required to file annual financial statements before July 31 of the year following the reporting year.
VAT due is usually payable on the date of the VAT return filing, but no later that the 10th day of the month following the reporting period.
Unlike employed workers, freelancers are not obligated to pay mandatory social security contributions. However, it is advisable (and, in some cases, mandatory) for freelancers to obtain the following insurance policies (Versicherung für Freiberufler):
Public or private health insurance (mandatory)
Pension insurance (mandatory for some types of activities)
Liability insurance (optional as it helps minimize the financial consequences in case of material and other damage)
Self-employed individuals
A self-employed individual (Gewerbetreibender) is a person engaged in practically any commercial activity related to the production or sale of goods, such as a merchant, craftsman, or goods manufacturer (excluding liberal professions).
IMPORTANT! Solar Staff is not a platform for selling goods. It can only be used for receiving payments for services rendered or work performed.
Registration requirements for self-employed individuals vary depending on the type of activity, and the process involves the following steps (learn more here):
Registering in the Commercial Register (Handelsregister)
Becoming a member of the Chamber of Industry and Commerce (Industrie- und Handelskammer / IHK)
Becoming a member of and registering with the Chamber of Crafts (Handwerkskammer / HWK)
Submitting an application to the local trade office (Gewerbeamt) and obtaining permission to conduct business (Gewerbeschein). This process is called business registration (Gewerbeanmeldung). The trade office, in its turn, notifies other authorities (the tax office, accident insurance fund, local court) about the registration.
IMPORTANT! Some professions may require obtaining a license or permit.
Read on to learn more about the tax liabilities of self-employed individuals.
Income tax (Einkommensteuer) is paid similarly to that payable by freelancers.
Value-added tax (Umsatzsteuer) is paid similarly to that payable by freelancers.
Trade tax (Gewerbesteuer) is a tax charged on net profit (not income) at a rate of 3.5%, multiplied by the local tax coefficient (for example, in Berlin, the trade tax rate is 14.35%). The first EUR 24,500 of profit is exempt from trade tax.
Tax returns and payment. In Berlin, the Chamber of Industry and Commerce (IHK) sends an annual notification (Beitragsbescheid) which specifies the amount of trade tax (Gewerbesteuer) due within 30 days. In the case of high income, IHK may request quarterly advance tax payments (Vorauszahlungen) due on February 15, May 15, August 15, and November 15 of the current year.
Insurance (Versicherung) obligations entail the acquisition of mandatory or voluntary insurance policies, similar to freelancers.
Sole proprietors
A sole proprietorship (Einzelunternehmen) is a simple business structure perfectly suited for independent individual contractors who engage in selling goods, providing services, or performing works. While sole proprietors enjoy full control over their business, there is no legal separation between the owner and the business, which means that the sole proprietor is personally liable for all business debts and obligations.
Registration as a sole proprietor involves several steps:
Filing an application for registration with the local trade office (Gewerbeamt) – usually, the tax authorities automatically send the necessary documents after registration (such as a tax registration questionnaire)
If required, submitting an application to obtain a tax ID number
Becoming a member of the Chamber of Industry and Commerce (Industrie- und Handelskammer / IHK)
Becoming a member of the Chamber of Crafts (Handwerkskammer / HWK)
Registering with a professional association (Berufsgenossenschaft) to access accident insurance services
Current account. In Germany, only corporations are required to open a business account. However, it is advisable (though not obligatory) for sole proprietors to have a business account as well – this helps clearly separate personal and professional expenses, making accounting easier.
German law makes a distinction between two types of sole proprietorships:
Small business (Kleingewerbe)
Commercial enterprise (Eingetragener Kaufmann)
Read on for more details about the types and obligations of sole proprietors.
Small business
A small business (Kleingewerbe) is a type of sole proprietorship generating an income of less than EUR 17,500 in the first year and less than EUR 50,000 in subsequent years. It does not need to be entered into the Commercial Register (Handelsregister), though it can be done on a voluntary basis.
Sole proprietorship naming. Without an entry in the Commercial Register, small businesses are required to use the sole proprietor's first and last name in business dealings; additions describing the type of activity, but not fictitious names, are allowed.
There are no accounting requirements for small businesses, but all invoices issued and received must be kept for ten (10) years, regardless of the income/profit amount. VAT invoices must meet the criteria set forth in Section 14 of the German VAT Act (Umsatzsteuergesetz, UStG).
The following mandatory taxes and contributions are payable by small businesses:
Income tax (Einkommensteuer) is paid similarly to that payable by freelancers.
Value-added tax (Umsatzsteuer) is not required to be calculated and paid, but this can be done voluntarily (in which case it is paid similarly to that payable by freelancers). Small businesses are not allowed to indicate VAT on their VAT invoices and are required to add a note of tax exemption according to Section 19 of the German VAT Act (UStG) instead.
Trade tax (Gewerbesteuer) is not payable if the profit is less than EUR 24,500, and if it exceeds this threshold, it is paid similarly to that payable by self-employed individuals.
Small business insurance coverage (Versicherungsschutz für Kleingewerbetreibende). Unlike employed workers, sole proprietors are not subject to mandatory social security requirements and may choose to pay for mandatory health insurance, sickness insurance, and make contributions to the state pension fund (similar to freelancers) at their discretion. It is advisable that small business owners additionally insure against professional risks (learn more here).
Commercial enterprise
A commercial enterprise (Eingetragener Kaufmann) is a type of business suitable for sole proprietors engaged in commercial business activity. According to Section 1 of the German Commercial Code (HGB), a business qualifies as a commercial enterprise if its nature and size require organized business operations. Qualifying criteria:
Asset value exceeding EUR 100,000
Size of annual turnover/sales (varies based on the business location and industry)
Size and condition of commercial premises (this criterion is secondary if the business has an IT-based structure)
More than five (5) employees
Loans of more than EUR 50,000 (either received or granted)
If a sole proprietorship meets the criteria for a commercial enterprise, it is subject to the provisions of the Commercial Code and the Tax Code. Sole proprietors are obliged to register in the Commercial Register (Handelsregister).
Commercial enterprise owners may choose their enterprise name at their discretion: it can be fictitious and is not required to feature the owner's full name, however it must be suffixed with the identifier "eK" (Eingetragener Kaufmann (i.e., “registered merchant”)).
IMPORTANT! When you withdraw funds from Solar Staff, the transfer can only be made using the individual's full name (it is not permissible to indicate any other name in the account).
Accounting requirements for commercial enterprises include double-entry bookkeeping and taking inventory once a year. It is also necessary to prepare annual financial statements in cases where, for two consecutive years, income exceeds EUR 600,000 or profit exceeds EUR 60,000.
The following mandatory taxes and contributions are payable by commercial enterprises:
Income tax (Einkommensteuer) is paid similarly to that payable by freelancers.
Value-added tax (Umsatzsteuer) is paid similarly to that payable by freelancers.
Trade tax (Gewerbesteuer) is paid similarly to that payable by self-employed individuals.
Insurance (Versicherung) requirements are similar to those applicable to freelancers or small businesses.
Additional information
Federal Central Tax Office (Bundeszentralamt für Steuern)
Federal Ministry of Finance (Bundesministerium der Finanzen)
Commercial Register (Handelsregister)
Chamber of Commerce and Industry (Industrie- und Handelskammer / IHK)
Chamber of Crafts (Handwerkskammer / HWK)
Local Trade Office (Gewerbeamt)
Income received through Solar Staff is declared using certificates and invoices, and in accordance with the offer agreement.
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].