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Freelancers and VAT: Everything You Need to Know!
Many freelancers have to deal with the topic of VAT for the first time when they start out as self-employed. This levy applies in Germany to almost all services and goods (§ 1 para. 1 UStG).
This levy applies in Germany to almost all services and goods (§ 1 para. 1 UStG). The standard rate is 19 per cent; for books and many food items it is, for example, seven per cent. But to what extent is this relevant to freelance work?
For all supplies made in Germany, freelancers — like businesses and other self-employed persons — must charge VAT. However, freelancers are not permitted to retain the VAT; they must remit it to the tax office.
Freelancers who are subject to VAT must submit advance VAT returns to the tax office at specified intervals. How frequently this must be done depends on how high the VAT liability was in the previous year.
If you remitted between 1,000 and 7,500 euros in VAT to the tax office in the previous financial year, a quarterly advance VAT return is required, due on the 10th of the month following the end of each quarter. Above 7,500 euros you must fulfil this obligation monthly (on the 10th of the following month in each case). The advance VAT return must be submitted online via the [ELSTER portal](https://www.elster.de/eportal/start) of the tax authorities.
For many freelancers, the advance VAT return represents a considerable administrative burden. The team at Guhr Steuerberatung is happy to take this workload off your hands, giving you more time for your commissions and clients.
Anyone who makes use of the so-called small-business scheme (Kleinunternehmerregelung) is not required as a freelancer to submit advance VAT returns (§ 19 UStG).
The prerequisite for this: turnover in the previous year must not exceed 22,000 euros. For the current year, the (estimated) upper limit is 50,000 euros. Important: invoices must be issued without VAT!
The small-business scheme (Kleinunternehmerregelung) offers freelancers several advantages:
- You do not need to show VAT on invoices
- Advance VAT returns and VAT remittances to the tax office are not required
- You can offer your services to private individuals at a lower price
- Tax adviser costs are generally lower
Whether the small-business scheme is suitable for you or whether it is better for you as a freelancer to charge VAT is something you should discuss with your tax adviser. Guhr Steuerberatung is happy to advise you in detail — get in touch!
In addition to small businesses, certain professional groups are exempt from the VAT obligation (§ 4 UStG). These include doctors, dentists, physiotherapists, and alternative practitioners (Heilpraktiker).
The same can apply to teachers working on a fee basis. The team at Guhr Steuerberatung will gladly check whether a VAT exemption applies in your case.
Freelancers who collected less than 1,000 euros in VAT in the previous year are exempt from the obligation to submit advance VAT returns. An annual VAT return suffices.
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About the author
Karsten Guhr · Managing Director & Tax Advisor
Founder of the firm. Advising entrepreneurs and holding structures on tax planning, structuring and succession for 15+ years.
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