Translation Work — Freelance or Commercial Activity?

There are significant differences between freelancers and traders, particularly in matters of tax law. It is therefore advisable to establish, before setting up in business, how the responsible tax office will classify your work. If you are unsure, please contact Guhr Steuerberatung!

The legislator defines freelance status in, among other places, the Income Tax Act (EStG). There it lists so-called catalogue professions: anyone working self-employed in one of these exemplary professions generally qualifies as a freelancer. This also applies to the two catalogue professions of translator and interpreter — both activities are explicitly mentioned in § 18 para. 1.

Working as a translator or interpreter is one of the typical liberal professions. A correspondingly large number of self-employed individuals earn their living as freelancers. There are exceptions, however: merely belonging to a catalogue profession is not sufficient; the relevant qualifications and the actual manner of practising the activity also matter.

For freelance work as a translator, several general and profession-specific criteria deserve attention. The first question is whether a genuinely self-employed activity exists at all. Self-employed individuals must, for example, work on their own account and must not be dependent on a single client — otherwise the arrangement may constitute bogus self-employment (Scheinselbstständigkeit).

The second question is whether you meet the conditions for freelance work as a translator. The following points are relevant:

- Qualification: Freelance practice requires that you can demonstrate the relevant competencies. For example, you hold the qualification of "State-Certified Translator" (Staatlich geprüfter Übersetzer) or have completed a degree in linguistics. Alternatively, you can evidence your qualification through practical professional experience. If you were previously employed as a translator at a company, this may suffice as proof. In such cases, translators without a formal qualification are also regarded as freelancers.

- Nature of service delivery: The organisation of the self-employed work plays an important role. Ideally, freelancers or their employees carry out the assignments themselves. Assignments may only be outsourced to third parties for good reasons and to a limited extent.

Freelancers enjoy several advantages compared to traders. These include:

- You do not need to register a trade with the local trade licensing office (Gewerbeamt) — registration with the tax office is sufficient.

- You do not pay trade tax, which represents both a financial and, above all, an administrative saving.

- Freelancers may use a cash-basis income statement (EUER) regardless of turnover; complex double-entry bookkeeping is not required.

It is therefore in your interest to work as a translator on a freelance basis. It may be worthwhile to record income from predominantly freelance work and predominantly commercial work separately. This prevents your entire self-employment from being classified as a commercial business. The experts at Guhr Steuerberatung will advise you competently!