There are two categories of self-employed work or freelancing in Germany: liberal professions (“freiberuflich” in German) and business/trade-style self-employment (“gewerblich” in German). In general, most artistic activities are classified as liberal professions – but not all. In the music sector, many artists are organised as non-commercial private partnerships (GbR). As partners in freelance professions, such as musicians, singers or composers, they can join together to from a band, an ensemble or a choir. It is sufficient to inform the local tax office when establishing a non-commercial pertnership (GbR).
The Federal Ministry for Economic Affairs and Energy offers an overview of “types of new business“ and related questions.
See also: Tips for (aspiring) self-employed musicians (Tipps für (angehende) selbstständige Musiker*innen - pdf in German).
It is often difficult to find good and clear translations into English for these two categories. The English word “freelance“ is often translated as and equated with “freiberuflich“. This can cause a problem if the person who sees himself/herself as a “freelancer“ (in the meaning of a liberal profession) actually conducts a business/trade-style self-employed activity, e.g. activities in the field of merchandising. This issue is especially relevant for third-country nationals residing in Germany with a long-term residence permit. Residence permits for self-employed artists are often limited to specific liberal professions. A visual artist holding a residence permit for a liberal profession-style activity is not allowed to sell art works at a market, for example. This would require an itinerant trading licence (“Reisegewerbekarte” in German) which can only be applied for when a business/trade-style self-employed activity was registered with the local tax office. The same applies to a musician (generally classified as a liberal profession) who wants to set up a record label – this is also classified as a business/trade-style activity. More information on this topic is provided on the touring artists website here or in the Ratgeber Selbstständige (in German).
Liberal profession or business?
Watch the short video tutorial by the Munich Business Startup Office here.
Frequently, fee contracts are concluded even though the contractual relationship involves employment subject to compulsory insurance (also "pseudo-self-employment). The contracting parties involved often prefer to conclude fee contracts in order to avoid having to pay their share of the social security contributions. If an audit by the pension insurance or health insurance bodies leads to the conclusion that an employment contract should have been concluded, the employer may be liable for substantial back payments and even face criminal charges in individual cases.
Note: Even if one has multiple clients, this does not automatically mean that an employment relationship cannot be classified as "pseudo-self-employment." The category of “pseudo-self-employment” applies if someone who is officially self-employed is being treated just the way an employee in a regular employment relationship would be treated. More information on the distinction between the status of self-employed and employed can be found at touring artists here.
Further information is also provided by the Deutsche Rentenversicherung (German Pension Insurance) here (in German language only).
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.
What happens if the client is insolvent and there are outstanding payments; for example, a fee has yet to be paid?
If a company declares bankruptcy, it must first be determined whether insolvency proceedings can be initiated. If this is not the case, one must assume that the fee is lost. If insolvency proceedings are indeed initiated, a debt-reduction schedule can be negotiated with the liquidator, which specifies what percentage of their open claims each creditor will receive. If no such plan is implemented and the company is sold, the sales proceeds will ideally be higher than the costs of the insolvency proceedings. If this is the case, the remainder can be distributed among the creditors based on a fixed percentage. In many cases, however, this is not economical.
In this context, it is important to note that if a company has filed for bankruptcy, it is considered insolvent and can no longer settle invoices. Even reminders or complaints will no longer be effective in such cases. If the company does pay individual creditors despite this, the liquidator can reclaim the money.
The German Insolvency Code is available here.
Handout by Martin Fritz for the workshop 'Abgemacht! Verträge und andere Vereinbarungen', organised by IG Bildende Kunst Vienna,April 6, 2016.
Handout as pdf in German language.
If artists or creatives are tasked with calculating a price for a performance or work, they are often left to consider the matter alone. Having to balance one’s own requirements and the assumptions of the client makes it hard to make an offer for one’s own work.
The Ratgeber Selbstständige published by mediafon GmbH (in German language), for example, provides some useful pointers on how to deal with these questions.
In Germany, there are a number of intra-industry publications that provide some hints as well as a basis for argumentation as to what constitutes an appropriate fee in a certain situation.
In Germany a distinction is made between exhibition remuneration and exhibition fee: an exhibition fee is a payment of an exhibitor made to the owner of an artwork - in most cases the artist - so that the artwork can be presented in an exhibition. Therefore the exhibition fee is an agreed compensation between the owner and the exhibitor for a (temporary) transfer.
One refers to exhibition remuneration when a statutory remuneration claim for exhibitions exists. An exhibition remuneration is then relevant in any case, without any further contract negotiations, as it is regulated by law. In Germany there is no statutory claim! – but it is again and again up to discussions.
These terms are often mixed-up ... and this already applies for Germany. But what’s the case in other countries or if artists and exhibition organisers from different countries are negotiating contracts? An interesting issue to be followed.