Self-employed workers

Example:
An actress and a stage designer are hired by a theatre for one season. Without further evaluation, the actress is considered employed subject to insurance contributions because she is integrated into the operations of the theatre and bound by its instructions. The stage designer, on the other hand, is self-employed, since his activity can be considered independent based on the list of exemption criteria (Negativkatalog) of the Künstlererlass (German Ordinance on Exemption for Artists).

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.


Self-employment as a primary activity

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).

Example:
A sculptor earns 1,200 euros per month through his self-employed artistic activity. In January, he takes up paid employment and earns an additional 400 euros. Starting in March, the company pays him 600 euros a month.

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.


Self-employment as a secondary activity

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. 

Example:
A graphic artist works for an advertising agency for 30 hours a week and receives a regular income of 30,000 euros per year, which is subject to social security contributions. On the side, he works for a publishing company in a freelance capacity, earning a regular annual income of 5,000 euros.

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


Freelancer or businessperson?

Example:
An artist and professional cabinet maker produces wood sculptures, which he exhibits with great success and sometimes sells following the exhibitions. His carpenter counterpart makes elaborate chairs and tables in series - also very successfully. The artist is a freelancer, the carpenter a businessperson.

If the artistic activity is carried out independently, the fiscal authorities still distinguish between freelance activity and a business enterprise when determining the status.
In general, artistic activities belong to the traditional freelance activities (cf. § 1 (2) PartGG and § 18 (1) EStG (German language only)). 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.

In the case of freelance work, the freelancer must apply for a tax number with the local tax office responsible. 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. The responsible trade office is always the trade office in the city in which the business is run or where the business is headquartered.
More information can be found on the BMWi business start-up portal.

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 (German language only). 

Freelancers may prove their income to the tax authorities by means of the simple cash method of accounting. A businessperson may only use this method for profits of up to 60,000 euros or a turnover of 600,000 euros per year (as of 2016). If the income is higher, the businessperson is obliged to keep balance sheet accounts, i.e. he/she must practise double-entry bookkeeping.

Detailed information on the distinction between self-employment, freelance work and business are available, for example, in the Ratgeber Selbstständige (German language only).


Unemployment insurance

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

Example:
A graphic artist was employed by a company subject to social security contributions for three years. In February 2016, the limited contract expires and the graphic artist becomes unemployed. She receives unemployment benefits and decides to become self-employed as of 1 June 2016. She has the option of applying for voluntary unemployment insurance until 31 August 2016.

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.


Pension insurance: a special scheme for performing artists

Artists who are employed by municipal theatres or state theatres in Germany generally have supplementary insurance coverage through the supplementary pension institution for German stage workers (Versorgungsanstalt der deutschen Bühnen) 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 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.

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, German language only) and can also be found on the Stiftung Tanz website.

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 (German language only).

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 (German language only).

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