Working In Germany as a Contractor

Some of us have worked as permanent employees here in Munich, and some have worked as contractors. When you work as a permanent employee, most of the things you need such as health insurance, pension, tax, etc is taken care of by the company you work for.

For contractors, you are expected to organise your own insurances, pension, tax returns, etc, and the majority decide to employee a qualified accountant and/or financial advisor to assist them.

The following information may be of use for contractors working or thinking of working in Germany.

Registration:
A contractor needs to register with the "Finanzamt" whereby a tax number (steuer nummer) is given to the contractor. Most companies when working with contractors request the contractor provides their tax number for the companies records.

It has been mentioned in some publications that contractors are required to register with the local authorities (Kreisverwaltungsreferat), but this is not the case.

VAT (Umsatzsteuer):
When a contractor submits an invoice (Rechnung) to a company, VAT at 19% should be added to the total invoice amount. The VAT is then paid to the Finanzamt.

Contractors should submit monthly VAT returns to the finanzamt, but those that employee a qualified accountant, would be informed by their accountant of when the full details.

Trade Tax (Gewerbesteuer):
A contractor is not required to pay trade tax, unless the contractor is registered as "Gewerblich". It is important that the contractor registers as a self employed contractor "freiberuflich".

The IHK "Industrie und Handelskammer" may contact the contractor asking for payment (approx € 100) to be advertised in the IHK Business Directory. This is not a requirement and is up to the contractor if they wish to be listed in the business directory

For further information visit their web site

Health Insurance:
Having health insurance is a legal obligation in Germany, and insurance premiums vary from provider to provider. The age, health status of the individual and type of cover required decides the monthly premium. Average cover for an individual at the age of 20 to 35 years can start from € 200 upwards per month.

Unemployment insurance:
It may be an idea for a contractor to take out Unemployment insurance, but it is not compulsory.

Pension: A contractor is not obliged to have a pension, but as with some investments for the retirement period, this would be beneficial for the contractor.

Accountant (Steuerberater):
Accountant fees vary depending on the assistance required by the contractor and costs can range between € 400 - € 1,000.

Should you have any questions or need assistance, please feel free to contact us.