I always knew I wanted to be my own boss. When I was working a salaried job, I would daydream about what it would be like to be self-employed. But I had no idea how to make the transition from employee to self-employed. I knew where I could get a good head start, though.

A few years ago, I left my cushy job in the UAE and moved to Germany—a country that is known for its thriving freelance culture. I wanted to start a freelance business to capture more opportunities. So I started my life here as an expat student as I figured a business school education would give me a boost.

If you’re thinking of making the switch yourself, here are some things you need to know before you become your own boss in Germany:

1.  You need to figure out if you are going to be self-employed or a freelancer.

For many of us, the words self-employed and freelancer are synonymous. But with the German bureaucracy being infamous for its fastidiousness, potential freelancers must understand that these terms mean wildly different things.

Self-employment is a catch-all umbrella term for any income-producing activity that is not conducted while being employed by a company or enterprise. In Germany, this is divided into two broad categories: freelancing and trade (commercial activity). Do note that when people talk about being self-employed in Germany, what they really mean is being a tradesperson (i.e., businessperson or entrepreneur). Many expats and even Germans often get confused about this, but the differences are important to note.

Within the freelancing category, there are further distinctions to be made: Freiberufler vs. Freelancer (Freier Mitarbeiter). In Germany, when people say “Freelancer”, they are usually referring to the second group, the “Freie Mitarbeiter”. Examples from this group would be marketing consultants, graphic designers, web designers, and copywriters. If you are a budding freelancer in Germany, then the tips in this article would be most helpful to you.

Why are these terms so important to understand? That’s because in Germany, you need to apply for specific permits or visas before you undertake any kind of business activity. And based on this, the Finanzamt (Tax Office) will classify how you will be taxed. Hence, you need to be able to anticipate how your work status will be regulated.

Decide if the pros and cons of being a freelancer are acceptable to you.

Working as a freelancer in Germany has perks that are the envy of tradespeople.

Key among them is that this is the easiest type of work to get into. You simply need to visit the Finanzamt to apply for a Tax ID and then you can start working as a freelancer. Meanwhile, tradespeople need to go through a few more regulatory hoops to be allowed to work.

Another key perk is being able to charge a higher than average hourly fixed rate or service packages. This means potentially getting a higher income relative to the general population.

Furthermore, freelancers enjoy special tax benefits that are exclusive to them. They are not required to register their business as a trade and hence do not need to pay trade tax. They are also not required to keep accounts and only have to submit a surplus income statement at the end of the year.

The downside to not having to pay trade tax is that freelancers pay a bit more on income tax. Also, you would not be eligible to sell products like books, planners, and merchandise in your capacity as a freelancer. But there is a workaround to that: you can try getting a permit for conducting mixed activities (gemischte Tätigkeiten). This way, you can scale your freelance business with sales from your trade business.

2.  Make sure you have a residence permit.

You can work as a freelancer in Germany without restrictions if you’re an EU/EEA citizen or Swiss national. But it’s important to know the requirements for different visa types before starting your freelancing career. You need to have the right permits and paperwork. That said, there are no restrictions on who can work as long as their visa or residence permit is up-to-date.

I started my freelancing journey a bit differently than most people. After getting an MBA from Reutlingen University, I was given over a year to find work. My search started right at the height of the COVID pandemic, so it took a bit of time for things to take off. If you are like me, a non-EU expat with a degree from a German university, you can start working as a freelancer right away with the jobseeker visa that you are granted. So here’s a top tip: try to get your second degree in Germany and then start your freelancing journey from there.

3.  Register with the Tax Office.

To register as a self-employed freelancer in Germany, it is important to file your application with the proper authorities.

You can either download and fill out an original form called “Fragenbogen zur steuerliche Erfassung” (Questionnaire for Taxation) and submit it to your local tax office. Alternatively, you can complete the form online through ELSTER (a German version). The forms need to be filled out in German. Take your time to complete them so that when you submit them, all the details match up correctly.

Should you choose to get in touch with the Tax Office yourself, have the following information on-hand:

• Your Tax ID
• Description of your freelance activity
• Details of your German bank accounts (both personal and business)
• Estimated business revenue and expenses
• Estimated profit
• Whether you wish to charge VAT

Based on the answers you provide, the Tax Office is going to determine whether or not you are a freelancer. They will issue a Tax Number (different from a Tax ID), which you will need to quote in your invoices and on your tax returns. If you request a VAT number, that will be provided as well.

And with all this, you are well on your way to being your own boss. Working as a self-employed expat freelancer in Germany is a daily challenge, but the rewards are great. So what are you waiting for? Apply these tips today and open up a new world of possibilities with a freelancing career in Germany!