Freelance work and taxes
While there have been freelancers in some industries (journalism) for many years, far more companies have now discovered this type of order processing. Freelance work has become so interesting for companies because the employee does not have to pay any social security contributions or taxes.
For many companies, freelance workers have a number of advantages. For some, it is primarily the cost savings that can be achieved as a result. Other activities cannot be carried out without freelance work.
Freelance work - activity without social security
Freelance workers usually act as subcontractors or work on the basis of so-called fee contracts.
- As a journalist or On-line-You are usually not permanently employed as a copywriter. Payment is made according to the agreed fee after delivery of certain articles or photos.
- As a parcel delivery company, you also work without an employment contract, as you are an independent haulier for other companies (parcel service).
- Some companies are very innovative when it comes to transferring the freelance work system. The innkeeper turns his former waiter into a free entrepreneur by selling him the beer, which he then sells on to the customers.
- Here it is usually not far until the whole thing can also be rated as pseudo self-employment. If the collection point of the pension insurance contributions proves this to you at some point, social security contributions, wage tax and interest charges due.
- For freelancers, unlike employees, employers do not have to pay any contributions to the social security fund. As a freelance entrepreneur, you are responsible for social security and paying taxes.
You pay taxes for your fee-based work. If you are on a fee basis ...
Register your income with the tax office and pay taxesÂ
Freelance work has some tax consequences for you. As an employee, your employer essentially takes care of the taxation of your monthly income.
- The Income Tax Act obliges every employer to withhold wage tax for employees on their account when paying a wage.
- It depends on compliance with the legal definition of employees. The employer is only exempt from paying income tax if, from a pension law perspective, you are engaged in an activity that is not to be classified as pseudo self-employment.
- In this case, you are fully responsible for reporting income to Tax office. You pay all applicable taxes on your income.
- As a freelancer, you have to comply with accounting obligations and submit an annual income tax return.
If you are in doubt as to whether you are working as a freelancer, contact the social security agency and apply for a status assessment procedure. The German pension insurance then finally clarifies whether you are an employee or not.
How helpful do you find this article?
