If you're an entrepreneur in Germany, you will regularly come across German terminology. It may seem daunting at first, or you can try to avoid it, but you will have to learn the main words sooner or later. 

If you ever asked "What does Umsatzsteuer mean?", "What is Rechnung?", or "Who are Kleinunternehmen" - you are in the right place. Here, we will break down the key terms and start building the vocabulary needed to operate in Germany. It would be a lie to say it will be a fun journey, but you will get much more confidence after learning the glossary below. We sorted the terms below by importance/breadth of use. 

Key terms and phrases for freelancers in Germany

Steuer

Let's start with the main word in the lives of many Germans. Steuer translates to tax. If you remember and start recognizing only one word from this article, then it's Steuer. Get used to this word, as it forms the start, middle, and end of many long German compound words.

Gewerbe

Gewerbe refers to a trade or business. If you're a self-employed person, but your work does not fall into the catalog of the liberal professions (Katalogberufe), you need to register a Gewerbe (tradesperson).

Gewerbesteuer

It is a compound word consisting of 2 words we just learned. Gewerbe-Steuer means Trade-Tax. 

Freiberufler

Freiberufler is the German term for a freelancer. Self-employed can only be Freiberufler if their profession is in the catalog of the liberal professions. The inclusion of a job in this catalog is essential as Freiberufler, unlike Gewerbe, doesn't need to pay the trade tax mentioned above.

Rechnung

A Rechnung is an invoice. When you provide a service to a client, you will issue a Rechnung detailing the service, the cost, and any applicable taxes.

Finanzamt

The Finanzamt is the German tax office. It's responsible for the administration of tax collection. As a freelancer, you must submit your tax returns and potentially VAT reports to the Finanzamt.

(Steuer)erklärung

A Steuererklärung is a tax declaration or tax return. The second part of the word, Erklärung, translates directly to "declaration" or "statement".

ELSTER

ELSTER stands for "ELektronische STeuerERklärung", meaning electronic tax declaration. The ELSTER portal is an online tax system designed by the German central tax office to enable anyone to submit their tax returns online. You'll need to register with ELSTER to submit your taxes online.

Umsatzsteuer or Mehrwertsteuer (USt or MwSt)

Umsatzsteuer refers to Value Added Tax (VAT) or sales tax in Germany. As a freelancer, you usually need to charge this to your clients and pay it to the tax authorities. We have many articles in our blog devoted to the intricacies of VAT.

Vorsteuer

Vorsteuer, or input VAT, is the VAT you pay on business-related purchases. You can often deduct this amount from the VAT you owe the tax office.

Kleinunternehmerregelung

Kleinunternehmerregelung is a small business regulation in Germany. If you're a freelancer whose annual turnover is less than €22,000 in the first year and €50,000 in the subsequent years, you can opt for this regulation and not charge VAT to your clients.

Umsatzsteuer-Identifikationsnummer (USt-IdNr.)

USt-IdNr. is the German VAT identification number. Suppose your clients are businesses based in other EU countries. In that case, you need this number to invoice them without VAT (reverse charge procedure).

Einkommen

Income.

Einkommensteuer

Einkommensteuer is income tax. As a freelancer, you pay this on your net profit (total income minus business expenses).

Sozialversicherung

Sozialversicherung is social insurance, covering health insurance, pension insurance, unemployment insurance, and nursing care insurance. It's mandatory for everyone in Germany, including freelancers.

Krankenkasse

Krankenkasse is health insurance. You can choose between private (Private Krankenversicherung, PKV) and public (Gesetzliche Krankenversicherung, GKV) health insurance in Germany.

Versicherung

Insurance

Krankenversicherung

Health insurance. As a freelancer, you're obliged to pay for your health insurance. Your health insurance provider is called your "Krankenkasse". You can choose a private or public provider, but as a freelancer, it is challenging to switch back to a public health insurance provider once you've gone with a private provider.

KSK or Künstlersozialkasse

The KSK is a governmental health insurance scheme that assists artists by paying half of their health insurance and pension contributions. This means the artist pays approximately half of the insurance fees they would normally pay as a freelancer.

(Steuer)bescheid

A Bescheid or Steuerbescheid refers to a document that provides information on a tax assessment determined by the tax office. Bescheid translates directly to "notice" or "decision".

Fragebogen zur steuerlichen Erfassung

The application form for registering as a freelancer. 

Gesetz

Law. This is another word that you'll see tacked onto the end of other words, such as "Umsatzsteuergesetz" (laws that govern value added tax) or "Einkommensteuergesetz" (laws that govern income tax).

Mahnung

This is a reminder of an unpaid invoice. You could receive this from the tax office for a missed or late payment. You also might send one out to clients if they've failed to pay your invoices within a reasonable time.

Rentenversicherung

Pension insurance. Freelancers are typically expected to arrange their pension insurance. However, they may take part in the public pension insurance system (GRZ or gesetzliche Rentenversicherung), and some classifications of freelancers (such as teachers) are obliged to participate in the public pension insurance system.

Säumniszuschlag

It's not something you want to see in your letters from the tax office! This term refers to fees or fines for late payment or missed deadlines. You'll see this if you've missed a payment or reporting period.

Scheinselbstständigkeit

This is a term that people warned me about a lot when I first started freelancing in Germany. Translating to "false self-employment", you need to be aware of and able to spot— particularly when signing on with a client on a retainer basis. Your freelance work could be classified as false self-employment if you take on a workload or level of expectations comparable to those of an employee. There can be repercussions for both you and your client if your relationship is determined to be false self-employment.

Selbstständig or freiberuflich

Self-employed or freelancing.

Solidaritätszuschlag

Solidarity surcharge. First introduced in 1991 after the fall of the Berlin Wall, the "Soli" is a 5.5% supplementary income tax rate contributing to the costs of German reunification.

Steuer ID or Identifikationsnummer

A unique and permanent tax identification number assigned to you when you first register as living in Germany. Your tax ID number is separate from any tax numbers assigned to you.

Steuerberater/in

Tax accountant.

Steuernummer

Tax number. You'll receive a tax number from your local tax office once you register as a freelancer. Each time you register any additional freelancing activities (i.e. if you're a freelance writer and wish to start working as a musician), you'll receive another tax number for each new activity. Unlike your tax ID number, your tax number can change, for example, if you move to a new city or region.

Überweisung

Bank transfer.

Voranmeldung

Pre-registration. You're likely to see this word in the context of your tax reporting deadlines. It means that you report an estimation of your earnings before your official tax declaration.

Vorauszahlung

Pre-payment. In some cases, freelancers are required to make tax pre-payments throughout the year based on income estimations. Don't worry, though. It's always reconciled in the end!

Germans struggle almost as much as expats 

While this list is not exhaustive, it's a great place to start. Learning key terminology and concepts is helpful—even crucial—to living and working successfully as a freelancer in Germany. We hope it empowers you to take an active role in understanding and managing your taxes and bookkeeping.