Starting up self-employed in Germany

I’m reading up on German tax and trade rules because I’m going to incorporate here this month and most of the things I read do not make me very happy. They look like they are more suited to a 19th century gentry than to creative workers in the multipolar 21st.

One such thing1 is being a Freiberufler. The Freiberuflich status, which means you work in a free profession, strikes me as an archaic oddity.

In the Netherlands we had the same for doctors, engineers and other learned individuals which meant you did not need to register at the Dutch Chamber of Commerce. You could just apply for a VAT number at the tax service and be in business. In the Netherlands this status got abolished and everybody was forced to register at that terrible excuse for an institution: the KvK.

In Germany being Freiberuflich rests on the same foundations but it also means you get a special tax cut (you don’t pay Gewerbesteuer) that other self-employed don’t get. This would seem to be along the division between people who create stuff from their knowledge and people who work in manufacture/trade.

That tax cut means that the Finanzamt examines your status a bit more stringently, because more people try to apply for the Freiberuflich status. There are a bunch of bizarrely outdated catalogue professions for which the decision has already been made. These number: blood type tester, ship compass rejiggerer and various other untranslatable things. In the digital professions the divisions are not very clear. A designer (in most cases) seems to be free, but a programmer (called by the humorous EDV —Elektronische Datenverarbeitung— term) usually not.

There are mainly two things wrong here.

The tax cut and the mostly arbitrary divisions that it entails seem unnecessary to me. For any enterprise, the difference between the cost you incur and the amount of money you can turn your time into, is your value add for which you already pay a VAT. Why then complicate matters2 with another tax designed especially to hurt the lower educated3?

More principally, the division between being a free profession and not, at its core rests on whether somebody has undertaken higher education. Something you do for which you have been educated4 may be a free profession, while if you don’t have the education for it, this may become an issue. While in most cases, upon examination it won’t be an issue at all, the fact that this division exists and could have repercussions for your tax status, potentially has a chilling effect. It implies that your tax system and in effect most of your society is not based on merit, but on if you managed to pass this or that (university) gate. That strikes me as a very unhealthy signal.

  1. I could go on and on but this is a bigger one.
  2. Oh yeah, in Germany there is also a special Church tax and a solidarity tax for the unification. Really, why would you complicate matters…
  3. Manual laborers, grocers, butchers and such.
  4. For instance being a photographer who has finished an art academy.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.