Freelancer vs. Sole-Trader in Germany: Which Legal Form Fits Your Self-Employment?
Peter
Updated on:
May 28, 2025
Quick answer: Are you a freelancer or a tradesperson?
TL;DR – 30-second rule of thumb
Freelancer = Freiberufler → You sell your own, unique, qualified professional services (think designers, developers, architects, translators, doctors). No trade licence, no trade tax.
Tradesperson = Gewerbetreibender → You produce or trade goods, or offer generic commercial services (e-commerce, cafés, artisans, barbershops). A trade licence is required, and the trade tax kicks in above 24.500 € profit.
When you register, the tax office (Finanzamt) confirms your status. You can’t simply choose the one you prefer.
Definition at a glance
Status | Core activity | Typical examples | Key obligations |
Freelancer (Freiberufler) | Personally delivered, knowledge-based services that fall under the “liberal professions” list in §18 EStG | Graphic designer, software engineer, journalist, lawyer, doctor, teacher | Register only with the Finanzamt, use simple cash-basis accounting, no trade tax |
Tradesperson (Gewerbetreibender) | Manufacturing, retail or any commercial service not on the freelancer list | Online-shop owner, barista, carpenter, dropshipper, rideshare driver | Register at the local trade office (Gewerbeamt), pay IHK fees, possible double-entry books & trade tax |
One-minute decision checklist
Do you mainly sell physical products or run a café/salon/workshop?
Yes ➜ You’re a tradesperson.Is your work based on a protected professional qualification (e.g., architect, doctor) or creative/consulting expertise you personally provide?
Yes ➜ Likely a freelancer.Will you invoice clients for hands-on services you perform yourself, without stock or subcontracted labour?
Yes ➜ Points to freelancer status.Will you need a trade licence (Gewerbeschein) to import, resell, or run premises?
Yes ➜ You’re a tradesperson.Still unsure?
Explain your activity on the ELSTER registration form. The Finanzamt will label you correctly and save you costly retroactive trade tax.
Understanding Germany’s two self-employment categories
The German tax code splits independent work into just two buckets. Knowing where you belong avoids surprise paperwork, back-dated taxes, and visa delays.
What qualifies as a freelancer (Freiberufler)
Scientific, artistic, educational & “catalogue” professions
Germany keeps an official “liberal professions” list in §18 of the Income-Tax Act. It covers:
Scientific & technical experts – e.g., engineers, data scientists, architects
Medical & therapeutic roles – doctors, psychologists, physiotherapists
Legal & business advisers – lawyers, tax advisers, auditors, consultants
Artistic & creative talents – journalists, UX designers, composers, photographers
Teaching & research – lecturers, language tutors, academic researchers
If your core activity is comparable in method and public trust to a listed job, the tax office will often treat it as freelance, even when the exact title is new (think “UX writer” or “AI ethicist”).
Proof of qualifications & personal responsibility
To access the lighter freelance rules, you must:
Demonstrate specialised know-how – a degree, professional licence or portfolio that proves expert skills.
Work personally and autonomously – you deliver the service yourself and sign off on the results.
Assume full professional liability – you, not hired staff, carry the legal and ethical responsibility.
If you meet those tests, you register only with the Finanzamt, file a simple cash-basis statement (EÜR), and never pay trade tax.
What counts as a trade business (Gewerbe)
Product sales, industrial & commercial services
Everything outside the liberal-professions box is automatically a trade. Typical signs:
You manufacture, import, or resell physical goods (e-commerce, bakery, 3D printing).
You run a commercial service operation with equipment or staff (e.g., a cleaning firm or a food truck).
Your legal form is a corporation (GmbH, AG); corporate entities are always trades, even if they offer consulting.
The law defines a trade in §15(2) EStG as any activity pursued “with intent to make a profit and participation in general commerce” that is neither agriculture nor a liberal profession.
Mandatory trade-office registration & licence
A trade business must:
File a Gewerbeanmeldung at the local trade office and pay a small fee (20–60 €).
Obtain a trade certificate (Gewerbeschein)—often needed by banks, suppliers, and the immigration office.
Join the IHK or HWK chamber and budget for membership dues.
Pay trade tax on annual profits above 24.500 € and, if turnover ≥ 800k €, switch to double-entry accounting.
Skip the Gewerbeanmeldung, and the authorities can classify you retroactively, charging back-dated trade tax plus chamber fees.
Bottom line: if you sell know-how you personally produce, you’re likely a freelancer; if you trade goods or scalable services, the state sees a trade business. When in doubt, describe your activity in detail on the Fragebogen form—the Finanzamt will rule, and you can start on the right foot.
Which option is “better” for you?
🔀 Neither status is automatically “better” — the Finanzamt assigns it by law. But understanding how each affects your tax bill, admin workload, and professional standing lets you plan smarter and lean toward the more efficient structure if you qualify for both.
Tax burden: who pays more? (freelancers vs. tradespeople)
Tax | Freelancer (Freiberufler) | Tradesperson (Gewerbetreibender) |
Income tax | Identical progressive rates for both groups | Same |
Trade tax (Gewerbesteuer) | 0 € (never levied) | Due on profits above 24.500 €. Effective extra load ≈ 7-17% depending on your city, but it is credited against income tax up to 3.8× the assessment figure—so the net hit can be small for sole proprietors. |
VAT | Same rules: charge 19 % (or 7 %) unless you choose the small-business exemption (<25.000 € prior-year turnover) | Same |
Chamber dues | None | Mandatory IHK/HWK membership; starter fee often waived, then ~€150 – €350 per year for small firms |
Accounting method | Always allowed to use simple cash-basis “EÜR” | Cash-basis up to 800k € turnover or 80k € profit; above that, switch to double-entry books and annual balance sheet |
Bottom line: If your expected annual profit is comfortably above 24.500 € and you live in a city with a high trade-tax rate, freelance status usually leaves more cash in your pocket. Below that threshold, the tax difference shrinks.
Book-keeping workload and fixed costs
Factor | Freelancer | Tradesperson |
Setup paperwork | One free online form (“Fragebogen zur steuerlichen Erfassung”) | Gewerbeanmeldung at local office plus ELSTER form |
Ongoing books | Keep income & expense log (EÜR), no balance sheet, no inventory counts | Same until you cross 800k/80k €, then double-entry, inventory, depreciation schedules |
Year-end filings | Income-tax return + VAT (if applicable) | Income-tax return, trade-tax return, VAT, IHK statistics |
Compulsory insurance | Some liberal professions require professional liability; costs vary | Craft, food or transport trades often need public-liability and accident cover |
Hidden extras | None | Chamber fees, signage regulations, potential licensing (e.g., food hygiene) |
Takeaway: Freelance status wins on sheer simplicity. If your activity already needs employees, stock, or a shopfront, the trade obligations may be unavoidable, but budget time or accountant fees accordingly.
Professional liability, credibility, and visa impact
Aspect | Freelancer | Tradesperson |
Regulatory prestige | Certain professions (law, medicine, engineering) carry protected titles and higher public trust | Less regulated; credibility stems from brand, not legal label |
Personal liability | Unlimited unless you incorporate (e.g., GmbH) | Same |
Permanent-residence path for non-EU founders | Freelance permit ➜ permanent residence after 5 years | Commercial self-employment permit ➜ permanent residence after 3 years, if the business is “sustainable and secure” |
Client perception | “Freelancer” signals personal expertise and lean structure | “Business” can look more scalable or product-oriented to investors and banks |
Rule of thumb:
Solo, expertise-driven consultants benefit from the freelance image and lighter admin.
Product sellers or growth-oriented agencies often need the trade route for licences, staff, and investor optics.
Quick self-assessment
Will your profit exceed 24.500 € soon?
Do clients value a protected professional title?
Do you need outside investment, premises, or staff within two years?
If you answered yes to 1 and 2, but no to 3, freelance status is usually the smoother ride. Reverse those answers, and a trade licence will likely serve you better. Still undecided? Describe your plan in detail on the ELSTER form; the Finanzamt’s ruling is final, and requesting clarity early saves retroactive headaches.
Free download – Mastering freelance in Germany: A practical handbook for beginners 📘
Ready to move from “research” to “real-world action”? Grab our free 40-page ebook and keep every key rule at your fingertips:
Inside the book | Why it matters |
A catalogue of freelance professions | Check instantly whether your activity meets § 18 EStG. |
Tax-deductible expenses cheat sheet | Know exactly what you can write off—from laptop upgrades to home-office rent. |
2025 tax calendar (income tax, VAT, trade tax & IHK deadlines) | Never miss a filing date or pay late-penalty interest again. |
Plain-English walkthroughs of bookkeeping, ELSTER forms and trade-tax mechanics | Replace legalese with actionable, step-by-step checklists. |
⬇️ Download your copy now—it’s free. Use it alongside Norman’s guided Fragebogen to launch (and run) your business with total confidence.
Who decides your status, and what if they disagree?
The short version: only the tax office’s written notice is binding. But the Gewerbeamt and IHK still influence the process, especially if they flag your activity as a trade while you think you’re a freelancer. Understanding each authority’s reach keeps you out of costly limbo.
Role of the tax office (Finanzamt)
Final referee. When you submit the “questionnaire for tax registration” (Fragebogen zur steuerlichen Erfassung), the Finanzamt reviews your business description, degrees, and sample contracts.
Issues your tax number plus a line that labels the income either “self-employed work” (§ 18 EStG) or “trade income” (§ 15 EStG). That label drives every downstream duty—trade tax, accounting method, chamber dues.
Requests extra proof if your job title is new (e.g., “AI prompt engineer”). Expect to send certificates, portfolios, or project references.
Can reclassify later. During audits, it may decide your activity is actually a trade (or vice versa) and back-date taxes up to ten years.
Role of the local trade office (Gewerbeamt & IHK)
Gatekeeper for trades. The Gewerbeamt registers any activity that looks commercial—manufacturing, retail, agency work—and issues the trade certificate (Gewerbeschein).
Automatic alerts. Once you file a Gewerbeanmeldung, the office forwards your details to both the Finanzamt and the relevant chamber (IHK or HWK).
Chamber membership. The IHK/HWK bills annual dues and sends industry-specific surveys. If you believe you’re a freelancer, you can submit the Finanzamt letter to waive the fees; otherwise, you must pay while the dispute runs.
Limited authority. The Gewerbeamt cannot override a later Finanzamt decision, but it can require you to maintain the trade licence until the tax office rules differently.
Appeals, mixed activities, and retroactive reclassification
Situation | What you can do | Deadline/tip |
Finanzamt calls your design studio a trade, but you disagree | File an objection (Einspruch) within 1 month of the notice. Attach proof of creative, personal services and point to § 18 EStG wording. | Clock starts the day the letter reaches your mailbox. |
You run both coaching (freelance) and an online-shop (trade) | Register two activities: keep separate invoices, accounts and tax numbers. Use clear wording on each invoice. | Mixing books is the fastest route to an audit. |
Audit reclassifies past years as trade income | Expect back trade tax + chamber dues + 6 % interest per year. You can still appeal, but interest keeps accruing. | Budget a reserve fund if your status is borderline. |
Gewerbeamt insists on a trade licence, Finanzamt says freelancer | Show the Finanzamt letter to the Gewerbeamt and request deregistration. Keep copies on file for future staff turnover there. | Bureaucrats change; paperwork endures. |
Key defence strategy:
Describe your business exhaustively and honestly on day one. Grey-area founders who present a concise expert-service narrative, attach qualifications, and use service-based wording (“design concept fee”) minimise reclassification risk. If a dispute still arises, react fast—late appeals lose by default, and the tax meter keeps running.
Registration step-by-step
Getting the paperwork right is surprisingly easy (for Germany). You can submit Fragebogen zur steuerlichen Erfassung via Elster.
Or use Norman’s free, guided version for fewer errors. Send the form directly to the Finanzamt. No Elster account is needed.
How to register as a freelancer
Submit a free Fragebogen zur steuerlichen Erfassung
Done: no trade office visit, no chamber dues, simple cash-basis bookkeeping from day one.
How to register a trade (trade licence, tax forms)
Visit the local trade office (Gewerbeamt) in person or use its online portal.
Pay the licence fee (20–60 €).
Describe your activity in commercial terms (“online retail of eco-friendly apparel”).
Submit the same free Fragebogen zur steuerlichen Erfassung (Finanzamt registration)
Receive the trade certificate (Gewerbeschein).
Automatic data-sharing: the Gewerbeamt notifies both the Finanzamt and the chamber of commerce (IHK/HWK).
Expect a separate IHK welcome letter with membership dues; for small firms, budget around €150 – €350 a year.
Can you be both, and how to keep the books clean
Yes. Many founders teach workshops (freelance) and run a merch store (trade). The golden rules:
Checklist | Why it matters |
Register each activity separately. You may receive two tax numbers. | Keeps tax rates and allowances accurate. |
Use distinct bank accounts or at least tagging in your software. | Easier VAT and profit tracking. |
Issue invoices with clear labels (“Service – freelance”, “Goods – trade”). | Auditors see instantly which income stream they’re checking. |
File two profit statements. | Avoids cross-subsidy red flags. |
Follow those steps—or use Norman’s free form and templates—and you’ll register in the right category, stay compliant, and avoid any nasty retroactive surprises.
Frequently asked questions
Which is better: freelance status or trade licence?
There is no one-size-fits-all answer—Germany’s tax law assigns the label according to what you actually do, not what you would prefer. If your work is knowledge-based, personally delivered, and matches the liberal-professions list, freelance status wins for simplicity: no trade tax, no chamber dues, simpler books. If you sell products, employ staff, or plan a scalable agency, a trade licence is inevitable and can even look more “business-ready” to investors. Focus on describing your real activity accurately; the “better” choice is the one that keeps you compliant and lets you grow without surprises.
Who pays more taxes, freelancers or tradespeople?
Income tax and VAT are identical for both groups.
Trade tax (Gewerbesteuer) is the wild card—freelancers never pay it, tradespeople do once their annual profit exceeds 24.500 €. However, sole proprietors get most of that bill credited against their income tax, so the effective extra load is often just a few percentage points.
Chamber fees apply only to trades.
If your expected profit stays under the 24.5k € threshold—or you qualify as a freelancer—the overall tax bite is smaller. Above that mark, the gap narrows, and the choice of status matters more for admin workload than for pure tax cost.
Who makes the final decision about my status?
The Finanzamt (local tax office) is the sole authority.
When you submit the Fragebogen zur steuerlichen Erfassung, the Finanzamt reviews your description, qualifications, and business model, then issues a written notice labelling your income as either “self-employed work” (§ 18 EStG) or “trade income” (§ 15 EStG).
The Gewerbeamt can require a trade licence if your activity obviously looks commercial, and the IHK/HWK will bill dues, but both must defer to the Finanzamt once it rules.
If you disagree with the classification, you have one month to file an objection (Einspruch) and present evidence.
Mixed activities? Register both streams separately, keep clean books, and let the Finanzamt assign each the correct label.
Bottom line: present your business honestly, attach proof, and the Finanzamt’s decision will stand, saving you from retroactive tax headaches later.
Key takeaways & next steps
Cheat-sheet summary
Question | Quick answer |
How to know your status? | If you sell personal expert services that fit § 18 EStG, you’re a freelancer; if you trade goods or run a scalable commercial service, you operate a trade business. |
Tax impact | Freelancers never pay trade tax; tradespeople pay it on profits >24.500 €, but most of it is credited against income tax. VAT and income-tax rules are identical. |
Admin workload | Freelancers file one ELSTER form and keep a simple cash-book (EÜR). Tradespeople add a trade-office registration, chamber dues and—above 600k € turnover/60k € profit—double-entry books. |
Who decides? | The Finanzamt makes the binding call. You have one month to appeal if you disagree. |
Can you be both? | Yes—register each activity separately, keep distinct books and bank feeds. |
Fastest way to start | Use Norman’s free, guided “Fragebogen zur steuerlichen Erfassung”; it auto-calculates Kleinunternehmer limits and includes tips on the question fields. |
✅ Whether you are a freelancer or sole trader - register your self-employment for free with Norman.