Self-employed workers

Who can be considered self-employed? It is sometimes difficult to distinguish whether the activity of an artist or creative should be considered self-employment or employment. In view of this difficulty, the German Federal Ministry of Finance implemented the Künstlererlass (German Ordinance on Exemption for Artists) on 5 October 1990 (BStBl 1990 I, p. 638). The Künstlererlasse defines the distinction between self-employment and employment and answers related questions on the deduction of income tax (it is similar to - but not to be confused with - the list of eligibility criteria used by social security bodies and to the procedure for determining status, see Employees). The Künstlererlass applies to artistic activities in theatres, orchestras, radio and television.

If an artist or creative is self-employed, he/she is not entitled to any protection under employment law. The Artists’ Social Security Fund (Künstlersozialkasse, KSK) was created in order to ensure that artists and publicists can nevertheless enjoy the benefits of the statutory social security scheme (see Artists’ Social Security Fund; Künstlersozialversicherung). It provides health insurance, long-term care insurance, and pension insurance coverage. Whether and how an artist or publicist can be insured depends on the extent of his/her freelance activity, among other things. The question of whether the self-employed activity constitutes the primary or secondary activity can affect the obligation to obtain insurance.

The following section explains a number of aspects that are relevant with regard to the status of self-employed persons.

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A self-employed artistic or creative activity is considered the primary activity when it constitutes the main focus of a person’s occupation and clearly exceeds any other gainful activity in terms of income earned and hours worked. If the time required for the self-employed activity exceeds 20 hours a week, it can be assumed that it is a person’s main occupation. In any case, this applies when the self-employment is the main source of income.

An additional part-time job, even in the non-artistic sector, is not relevant with regard to the insurance obligation in the KSK. This also applies to marginal or short-term employment (see 'Marginal and short-term employment' below).

The self-employed artistic activity is to be regarded as the main occupation, also because the hours worked still clearly exceed those of the dependent employment relationship.
The sculptor receives pension, health and long-term care insurance coverage through the KSK. The part-time employment relationship is subject to social security contributions from the month of March. However, this does not apply to health and long-term care insurance. This means that the employer does not need to pay social security contributions to the health insurance fund for these two classes of insurance.

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Self-employed artistic activity as a secondary activity can be particularly attractive to artists when they are just starting out and can ensure a steady income through parallel dependent employment.
Self-employment is classified as a secondary activity if the dependent employment relationship is the focus of income generation and activity. The part-time working hours should not exceed 18 hours a week and the income may not be higher than the income from the primary activity. As a rule, no supplementary social security contributions must be paid for self-employment, since these are already paid as part of the primary activity. This also applies to artists.

The income from his freelance artistic activity is exempt from social security contributions (even if the artist exceeds the income threshold for compulsory insurance through the KSK, as is the case in this example). The artist’s livelihood is ensured by his primary activity in the advertising agency, which is subject to social security contributions. Any applicable social security contributions are paid in connection with this dependent employment.
A worker is also exempt from social security contributions if the primary activity is performed abroad. Self-employment as a secondary activity is exempt from social security contributions in Germany in this case.
Important: Information on the taxation of primary and secondary activities can be found under Income tax.

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Clients often prefer to conclude fee contracts (Honorarverträge). Fee contracts do not oblige clients to pay social security contributions. Artists with residence permits that only permit self-employment are also often hired on the basis of fee contracts. This entails a certain risk: Fee contracts are often concluded even though the contractual relationship actually involves employment that is subject to social security contributions (sozialversicherungspflichtige Beschäftigung). German law has developed criteria for determining when someone must be hired as an employee.

The following are examples of criteria that necessitate employment subject to social security contributions:

• the employer has the authority to issue instructions (Weisungsbefugnis) regarding the times, duration, place and nature of the activity, i.e. the client determines when, where and how the work is to be carried out.
• the artist or creative does not have his/her own place of business or equipment. The activity is integrated into the company/organisation.
• the artist is not authorised or obliged to delegate duties to others.
• the artist is not subject to any business risk, i.e. no use of own capital.
• the artist is entitled to a certain number of days off as well as to continued payment of remuneration (Entgeltfortzahlungsanspruch) in the event of illness, i.e. payments will continue in the event of sick leave.
• fixed salary, no share in revenue.

If artists work for a fee and even only partially meet these criteria, they may be engaged in what is referred to as "pseudo self-employment". If an audit by the pension insurance or health insurance bodies leads to the conclusion that an employment contract should have been established, both the artist and the employer may be liable for back payments and face criminal charges.

It is often assumed that an artist is automatically considered to be self-employed if he/she has several customers or clients. This is not necessarily true, however: each individual relationship between contractor and client must be considered.

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If an artistic activity is carried out independently, a distinction is made between freelance activity (freiberufliche Tätigkeit) and a business enterprise/commercial activity (Gewerbebetrieb). The distinction is particularly relevant in relation to the tax authorities and social insurance institutions, each of which have their own criteria for classifying an activity.
There are differences with regard to registering an activity and with regard to taxation. Freelance artists and creatives pay only income tax. If the artist or creative is classified as a businessperson, he/she must also pay business tax and requires a business license for which he/she must apply to the trade office. Information can be found on the BMWi business start-up portal. However, this buisness tax is only due from 24,500 euros profit, until then the regular income tax applies. From this limit, the buisness tax "replaces" the income tax up to a profit of approx. 100,000 euros.

In general, artistic activities belong to the traditional freelance activities (cf. § 1 (2) PartGG and § 18 (1) EStG (in German)). In principle, this applies to all sectors. An activity can be said to be artistic if the work is a person’s own creation and “achieves a level of artistic originality” that exceeds the mere mastery of a technique. A certain education (e.g. university studies in a certain form of art), participation in art exhibitions and membership in professional associations etc. may also act as indicators of artistic status.
The Praxishilfe Freiberufliche Künstlerinnen und Künstler (only available in German) of the Federal Ministry for Economic Affairs and Energy (Bundesministeriums für Wirtschaft und Energie) provides an overview.

The following are examples of activities performed by artists and creatives that are generally classified as business enterprises:

• operation of a music label or the distribution of sound recordings.
• operation of a publishing house, gallery, artists' agency or advertising agency.
• sale of serially produced art on a market – this requires an itinerant trade license (Reisegewerbeschein).
• designing of objects for daily use with little creative effort.

The final decision rests with the tax authorities: in case of doubt, the tax office will determine the artistic status of the applicant. Different regulations apply to the procedure in the various federal states. See, for example, the information provided by the Bavarian State Tax Office (only available in German).

Important! Artists and creatives who apply for a residence permit in Germany before taking up self-employment should be sure to apply for the correct permit, i.e. for a freelance activity (Section 21 (5) German Residence Act – Freelancing) or a business enterprise/commercial activity (Section 21 (1) German Residence Act – Self-employment). This distinction is also relevant with regard to the residence title. The purpose of the stay can be changed subsequently, but this involves additional administrative effort.
 

Registering a self-employed activity and obtaining a tax number
Self-employed persons must declare their self-employment by applying for a personal tax number (Steuernummer) at their local tax office (Finanzamt). A personal tax number will then be issued, which is valid for the activity registered and is associated with the respective local tax office. A new tax number will be issued if you move to the catchment area of another tax office or change your activity. If several different activities (freelance and business enterprise) are engaged in at the same time, several tax numbers are often issued.
The tax number is required for filing an income tax return (Einkommensteuererklärung). In addition, invoices pertaining to self-employment work may only be issued if they include a valid tax number (or, if available, a VAT identification number (Umsatzsteuer-Identifikationsnummer)) (see also Writing invoices when self-employed at www.touring-artists.info).

The activity can be registered with the responsible tax office online (Tax offices in Germany – Online search - only available in german) using the tax registration form ("Fragebogen zur steuerlichen Erfassung" – pdf template - only available in German). This form can be mailed in or delivered in person. If the tax identification number is not received after two weeks, we recommend that you contact the tax office.

Important! The personal tax number (persönliche Steuernummer) should not be confused with the tax identification number (Steuer-Identifikationsnummer), which is assigned automatically, either immediately after birth or when you first register a residence in Germany. It is valid for your entire life and is referenced in any communication with the tax office. The number is linked to personal data such as date of birth, place of residence, responsible tax office, etc.


Registering a business enterprise
Businesspeople must register their business enterprise with BOTH the tax office (Finanzamt) and the trade office (Gewerbeamt)!
The responsible trade office is the trade office in the city in which the business is run or where the business is headquartered. The authority responsible for the registration varies depending on the city. In most cases, the responsibility lies with the regulatory authority (Ordnungsamt), the city hall, the citizen's office (Bürgerbüro) or the trade office itself. The best way to find out which office is responsible is to ask at the local city hall (Online trade office search - only availabe in German).
Some cities offer an online registration procedure (Business registration template - only available in German). Registration of a business is subject to a fee (between 10 and 60 euros depending on the location).
A business can also be registered retroactively. A delay of one to two months should not have any negative consequences if you approach the trade office yourself.

The trade office sends information pertaining to the registration to the relevant tax office and, if applicable, the trade association (Berufsgenossenschaft). These authorities may request additional documents from the applicant. Some paperwork is therefore required and extended waiting times are possible.

Businesspeople must join the Chamber of Industry and Commerce (Industrie- und Handelskammer, IHK) and pay an annual fee, which depends on the annual turnover and the legal form of the enterprise. Exemptions from the obligation to pay the fee are possible for certain reasons.
The local IHKs provide detailed information on their websites (IHK search - only available in German).

Information on business registration can be found at www.gewerbeanmeldung.de (only available in German).

Itinerant Trade License
An Itinerant Trade License is required by anyone who offers others goods on a commercial basis outside his/her commercial establishment (place of business) or without a place of business, visits others without a previous order and offers them goods or services or wishes to accept orders. Examples are carnies, traders with stalls, traders visiting apartments. The Itinerant Trade License is valid nationwide.
More information is available here.

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In general, self-employed artists and creatives are not covered by statutory unemployment insurance.

If a self-employed artist or creative has previously been employed, he/she may take out voluntary unemployment insurance under certain conditions. The prerequisite is that he/she was covered by mandatory unemployment insurance for at least 12 months within the two years prior to the application. If unemployment benefits under the Social Security Code (SGB Book III) were drawn immediately prior to the start of self-employment, a person may also be permitted to conclude a voluntary unemployment insurance contract. The application must be submitted to the local employment agency within the first three months of self-employment.
Additional information can be found on the BMWi business start-up portal.

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Artists who are employed by municipal theatres, state theatres or in orchestras in Germany generally have supplementary insurance coverage through the supplementary pension institution for German stage workers (Versorgungsanstalt der deutschen Bühnen) or the German cultural orchestra pension institution (Versorgungsanstalt der deutschen Kulturorchester) of the Bavarian Chamber for Social Benefits and Pensions (Bayerische Versorgungskammer). This is an additional obligatory pension insurance scheme which was established to protect artists from poverty in old age.
Since 2011, actors and musicians who are hired as independent contractors also must obtain supplementary insurance if they participate in more than seven rehearsals and performances per year and per production at a German municipal or state theatre or an orchestra.

Between two employments or after the end of an employment relationship with a theatre, self-employed artists can continue their insurance coverage by paying a basic monthly contribution of 12.50 euros to the Bavarian Chamber for Social Benefits and Pensions (Bayerische Versorgungskammer).
Information is provided by the Bavarian Chamber for Social Benefits and Pensions (Bayerische Versorgungskammer - only available in German). Information about the Versorgungsanstalt der Deutschen Kulturorchester (German cultural orchestra pension institution - only available in German) is also available from the Bavarian chamber for social benefits and pensions (Bayerische Versorgungskammer).

Voluntary insurance of self-employed artists with the Pension Fund: self-employed artists on the independent theatre and dance scene have been eligible to obtain voluntary coverage from the Pension Fund for German stage workers (Versorgungsanstalt der deutschen Bühnen) since the beginning of 2017.
Further information can be found here (only available in German).

Special arrangements for dance group members (lump sum): As dancers can only work on stage for a limited period of time, they may be entitled to a lump sum payout from their insurance through the Pension Institution under certain conditions. This lump sum is intended to facilitate a change of career and help retired dancers establish a new livelihood. Dancers and dance group members receive the lump sum when they turn 36 at the earliest and at the latest at the end of the season during which they turn 45 and end their activity on stage. In addition, they must demonstrate satisfactorily that they have completed retraining or have started a new business and that they have not claimed any benefits (pension due to (occupational) disability, etc. The regulations apply to dancers and dance group members who have been insured since 2011 and discontinue their work on stage after 2015.
Detailed information can be found here (only available in German).

Further information on the Bayerischen Bühnenversorgung a.o. on the questions: Can artists residing abroad be exempted from the obligation to hold this insurance cover? Can artists residing abroad be reimbursed for contributions paid? etc. are available here on our website.

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