Self-employed work in Germany is either a freelance profession (freiberufliche Tätigkeit) or a trade (Gewerbe), and you don't get to choose. It follows from what you actually do and, for many professions, from your training. Freelancers register only with the tax office, pay no trade tax and are never IHK members. Traders register at the trade office, pay trade tax on profit above €24,500 a year and belong to the IHK. The tax office (Finanzamt) decides, and it can change its view years later.
1. What changes between the two
Income tax is the same either way: profit from both is taxed at the normal rates, and the small-business VAT exemption works the same for both. What differs is everything around it:
| Freelance profession (Freiberufler) | Trade (Gewerbe) | |
|---|---|---|
| Where you register | The Finanzamt only, through its registration questionnaire (§ 138(1) AO) | The trade office (Gewerbeamt) first, which informs the Finanzamt; the Finanzamt's questionnaire follows (§ 14 GewO, § 138 AO). The trade office charges a fee: in Berlin, €15 online or €26 in person |
| Trade tax (Gewerbesteuer) | None | On trade earnings above €24,500 a year for individuals and partnerships (§ 11 GewStG), largely offset against income tax |
| Chamber of commerce (IHK) | Not a member (regulated professions such as doctors or architects have their own chambers) | Member by law (§ 2 IHKG); no fee for small traders not in the commercial register with trade earnings up to €5,200 (§ 3(3) IHKG) |
| Bookkeeping | A simple cash-basis profit statement (Einnahmen-Überschuss-Rechnung, EÜR), whatever the size | EÜR while turnover stays at or below €800,000 and profit at or below €80,000; above that, double-entry books (§ 141 AO, § 241a HGB) |
| VAT on payments received (Ist-Versteuerung) | Available at any turnover, on application | Only up to €800,000 turnover in the previous year (§ 20 UStG) |
| Partnership company (Partnerschaftsgesellschaft) | Available (§ 1 PartGG) | Not available |
So the label matters less for a small business than people fear, because of the trade tax allowance and the credit against income tax (the trade tax guide explains both). It matters more as profit grows, in towns with a high trade tax rate, and above all in partnerships (section 4).
2. Who counts as a freelancer
"Freelancer" in everyday English and Freiberufler in German tax law are not the same thing. Plenty of people who call themselves freelancers are traders for tax purposes. The test is in § 18(1) No. 1 EStG, which has three groups:
- Five kinds of activity, done independently: scientific, artistic, writing, teaching and educating (wissenschaftlich, künstlerisch, schriftstellerisch, unterrichtend, erzieherisch).
- The listed professions (Katalogberufe): doctors, dentists, vets, lawyers, notaries, patent attorneys, surveyors, engineers, architects, commercial chemists, auditors, tax advisors, consulting economists and business economists (beratende Volks- und Betriebswirte), sworn accountants, Steuerbevollmächtigte, non-medical practitioners (Heilpraktiker), Dentisten, physiotherapists (Krankengymnasten), journalists, photojournalists, interpreters, translators and maritime pilots (Lotsen).
- "Similar" professions (ähnliche Berufe): similar to one listed profession in its essentials, which the courts read as both comparable training and comparable work. Someone who taught themselves has to show knowledge across all the core areas of that profession. For computer science, the Federal Fiscal Court (Bundesfinanzhof, BFH) treats mathematics as one of those core areas, and a gap there meant trade income (BFH, 16 September 2014, VIII R 8/12).
Staff are allowed, within limits. A freelancer can use qualified employees, as long as they themselves lead the work and take responsibility for it on the strength of their own expertise (leitend und eigenverantwortlich, § 18(1) No. 1 sentence 3 EStG). When the business grows to the point where others do the work and the owner can no longer check it, it becomes a trade. A translation partnership that regularly bought in translations into languages its partners didn't speak was held to be a trade on exactly that point (BFH, 21 February 2017, VIII R 45/13).
3. The grey zones: IT, consulting, marketing, coaching
Most disputes come from work that is not on the list and is judged as "similar" or as one of the five activities. The examples below are the published guidance of the Cologne chamber of commerce (IHK Köln) and the BFH's case law. They are patterns, not rules: the Finanzamt looks at what you actually do.
IT
Developing hardware, system or application software is generally treated as freelance (similar to an engineer). The BFH counts network and system administration among IT engineering work, but held that checking software files for errors, work of low to medium difficulty, was a trade (VIII R 17/12). User support (Anwenderbetreuung) is treated as a trade.
Consulting
"Beratender Betriebswirt" is a listed profession, but only for someone familiar with the main areas of business administration, not just one specialist field, and who uses that breadth in the work (VIII R 2/14). The narrower the specialism, the closer the work is to a trade.
Marketing
Advertising consultants (Werbeberater) are generally a trade; marketing consultants are judged case by case. Copywriting can be freelance writing when the text is the author's own creative work, and design can be artistic work, but design that isn't artistic is a trade.
Coaching and training
Training is generally teaching, and teaching is freelance. Coaching that deals only with mental or interpersonal topics is generally a trade. A coach who runs seminars that teach skills can be teaching.
4. Doing both: mixed work and partnerships
On your own, a freelance activity and a trade are assessed separately where they can be separated in the usual view of things. A translator who also sells software licences has two businesses: freelance income from translating, trade income from the licences, and trade tax only on the second. That only works if the two are kept apart in the records: separate income, separate costs. If the two are so bound up with each other that neither works alone, they are treated as one activity and classified by what dominates (IHK Düsseldorf).
In a partnership the rule is harsher. If a partnership (a GbR, Partnerschaftsgesellschaft, OHG or KG) does any trade at all, all its income counts as trade income, the freelance part included. This is the contamination rule (Abfärbung) in § 15(3) No. 1 EStG, and the statute adds that it applies even if the trade part makes a loss.
- A small margin is tolerated. The BFH doesn't apply the rule where the trade turnover is no more than 3 % of the partnership's total net turnover and no more than €24,500 in the year. Both limits must be met (BFH, 27 August 2014, VIII R 6/12).
- Every partner has to qualify. A partnership is freelance only if each partner meets the freelance test personally. With one partner who doesn't, the whole partnership earns trade income (BFH, 10 August 2010, VIII R 44/07).
- Keeping a trade part apart usually means running it through a separate business with its own contracts, invoices, bank account and books. Whether a separation holds depends on its being real, and that is a set-up to plan with a Steuerberater before it starts.
A GmbH or UG is always a trade, whatever it does: all its income is trade income (§ 2(2) GewStG, § 8(2) KStG). A translator or architect who moves the work into a company takes on trade tax and IHK membership with it. The GmbH or UG guide covers the company forms.
5. How the Finanzamt decides
No authority hands out a "Freiberufler certificate". When you start, you describe your work in the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung), filed through ELSTER within one month (§ 138(1b) and (4) AO); the registration guide walks through it. The Finanzamt classifies the work from that description.
That first classification doesn't bind it for later years. The question is open again with each annual assessment, and it typically comes up when a tax audit (Außenprüfung) looks at how you actually work, when the Finanzamt sends a questionnaire about your activity, or when your work changes. Registering a trade at the Gewerbeamt doesn't make you a trader for tax either, and not registering doesn't make you a freelancer: trade law and tax law each apply their own test.
Certainty in advance exists for a set-up you haven't started yet: a binding ruling (verbindliche Auskunft) from the Finanzamt (§ 89(2) AO). It is meant to be decided within six months and costs a fee based on what the ruling is worth to you, with no fee below a value of €10,000. Where no value can be put on it, the fee is €50 per started half hour of work, nothing under two hours (§ 89(3)–(6) AO). The application has to describe the planned facts precisely, which is usually Steuerberater work.
6. If the Finanzamt reclassifies you
When work you treated as freelance is reclassified as a trade, several things follow:
- Trade tax for the years still open. The €24,500 allowance and the credit against income tax (§ 35 EStG) often absorb much of it. Where the town's trade tax rate is above 400 % (Munich: 490 %), part of it is a real cost.
- How far back. The assessment period is four years (§ 169(2) AO), but where a required return was never filed, it starts up to three years late (§ 170(2) AO), so years more than four back can still be open.
- Interest on back tax at 0.15 % a month (1.8 % a year), from 15 months after the end of the tax year (a little later for 2020 to 2024) (§ 233a AO, § 238(1a) AO).
- A trade registration at the Gewerbeamt. Failing to register is an administrative offence with a fine of up to €1,000 (§ 146(2) and (3) GewO).
- IHK membership and its yearly fee, which depends on trade earnings. Individuals not in the commercial register pay none up to €5,200 (§ 3(3) IHKG).
- Double-entry books if turnover is above €800,000 or profit above €80,000. Under tax law the duty starts only with the business year after the Finanzamt tells you (§ 141(2) AO); a business in the commercial register can owe them under commercial law directly. The bookkeeping guide has the detail.
- VAT on payments received stays available only up to €800,000 turnover (§ 20 UStG).
If you disagree, the objection (Einspruch) against the notice has to reach the Finanzamt within one month (§ 355 AO). For trade tax, that means the trade tax base notice (Gewerbesteuermessbescheid) from the Finanzamt, not the town's bill. The objection guide explains how.
7. Where a Steuerberater comes in
The classification turns on details: what exactly you deliver, your training, who does the work, what your contracts and invoices say, and how a partnership is set up. A Steuerberater can look at those against the case law, describe the work properly in the registration questionnaire, plan the separation of a trade part, apply for a binding ruling, or deal with a reclassification and its back taxes.
Have a short description of your work, your qualifications, sample contracts and invoices, and any letters from the Finanzamt ready. You can request an English-speaking Steuerberater.
The short version
- The label follows the work, not your choice or what you call yourself.
- Freelance means the list in § 18 EStG, the five activities, or a profession genuinely similar to a listed one.
- A trade brings trade registration, trade tax above €24,500 profit (largely credited against income tax) and IHK membership.
- Partnerships become a trade with any trade activity above the 3 % / €24,500 margin, or with one partner who doesn't qualify.
- Reclassification can reach back more than four years, with interest. Planning the set-up beforehand is cheaper than repairing it.
Sources checked on 22 October 2026. The linked provisions are the German statutory text and the decisions of the Federal Fiscal Court; the explanations here are general information.