Freelance trade: Information

Information on the conditions under which self-employment is a commercial activity and when it is a freelance activity.

Anyone who becomes self-employed either runs a business or belongs to the liberal professions. The "liberal professions generally have as their content, on the basis of special professional qualifications or creative talent, the personal, independent and professionally independent provision of services of a higher nature in the interest of the clients and the general public" (Partnership Companies Act - PartGG). The distinction between commercial and freelance work is important, as there are some special features for the liberal professions, such as the own professional rights for some occupational groups.

For example, no business registration is required for the liberal professions. In addition to income tax and, under certain circumstances, sales tax, freelancers do not have to pay trade tax.

Independent scientific, artistic, literary, teaching or educational activities are understood as the exercise of a liberal profession. These primarily include the so-called catalogue professions, such as doctors, notaries, lawyers, tax consultants, architects, engineers, journalists, which are listed in § 18 paragraph 1 number 1 of the Income Tax Act (EStG). But also the exercise of a profession similar to the catalogue professions is a freelance activity. The delimitation is to be made in each individual case according to the specific activity.

In cases of doubt, the hearing of an expert may be helpful in assessing whether an artistic activity is carried out on a freelance and non-commercial basis.

An essential distinguishing feature of a freelance from a commercial activity is the personal qualification and the intellectual-ideal work performance. If freelancers work independently on the basis of their own specialist knowledge, the participation of salaried employees or other freelancers does not lead to a commercial activity.

Mixed activities
There is also the possibility of being both freelance and commercial. Accordingly, income can be obtained both from self-employment within the meaning of § 18 sec. 1 no. 1 EStG and within the meaning of § 15 EStG.

In order to classify the nature of your income under tax law, the tax office distinguishes between separable and inseparably mixed activities in the case of a sole proprietor.

T rennbar mixed activities
If a freelancer carries out both a freelance and a commercial activity, these are to be treated separately for tax purposes. However, this is only the case if there is no connection between the two areas (so-called mixed-separable activity).

In order to separate the freelance sector from the commercial one, the following is recommended:

  • separate accounting,
  • segregated bank accounts,
  • spatial separation of establishments or at least separation of stocks of goods.

Operating expenses, on the other hand, can be divided by estimation.

Inseparably mixed activities
Inseparably mixed activities exist when the income from different sources of income cannot be separated and the individual activities are mutually dependent, since there is a factual and economic connection between them. If the activities are linked in this way, the overall picture of a sole proprietor's activity determines the classification as freelance or commercial. The overall picture does not result from the shares of activities in turnover or profit, but from the activity that characterises the overall activity.

A commercial activity is accepted if:

  • the establishment appears externally as a single entity and the freelance activity presents itself as a by-product of the commercial activity, or
  • a uniform success or a uniform service is owed and freelance elements are also included in the commercial activity.

Special features for partnerships
In the case of partnerships (OHG, KG, GbR), the "abrasion theory" applies, according to which the activity of the partnership as a whole is regarded as commercial if it carries out a commercial activity in addition to a freelance activity. In a judgment of 11 August 1999 (Az.: XI R 12/98), however, the Federal Finance Court created an exception to the abrasion rule, which had been strictly adhered to to date. A reclassification of freelance income into commercial income does not take place if the commercial activity of the partnership is of "very minor importance". In the event of a dispute, a joint practice for physiotherapy generated income from (freelance) physiotherapy activities and from the sale of neck pillows and ointments. Sales activity accounted for 1.25 percent of the total activity. The Federal Fiscal Court is of the opinion that such a minimal commercial activity must have no effect on freelance work.

Freelance work
A freelance activity is not to be equated with a freelance work.


Further information on the distinction between freelance and commercial activity can be found in the brochure "Freelance profession or trade"; Information on the differences between the two forms of activity "freelance work" and "freelance work" can be found in the information sheet "Differences: Freelance work and freelance work". Both brochures can be downloaded from the website of the Nuremberg Institute for Liberal Professions (IFB).

Before you go to the tax office, you should check for yourself whether you meet the requirements for freelance work on the basis of 8 questions. These are fulfilled if you can answer all the following questions with "Yes".

  1. Can you prove a sufficient professional qualification for your job (similar to the "catalogue occupations")?
  2. Do you provide spiritual and non-material services (e.g. healing of the sick, legal advice, static calculations)?
  3. Is there a mutual and long-term relationship of trust with the service recipients (as a prerequisite for your independence from instructions)?
  4. Is this relationship of trust based on a free choice of the service recipients?
  5. Do you provide the services personally (and do not let your employees do your work)?
  6. Are you self-reliant?
  7. Are you a leader in your company?
  8. Do you make technical decisions freely and independently?

Further information can be found on the website of the Federal Association of Liberal Professions (BFB).

  • BFB
  • Publications of the IFB Nuremberg
  • Paragraph 18(1)(1) of the Income Tax Act (EStG),
  • § 138 Abs. 1 Abgabenordnung (AO),
  • § 1 sec. 2 Act on Partnership Societies Members of the Liberal Professions (Partnership Companies Act - PartGG).

Related Links

  • § 18 EStG
  • § 138 AO
  • PartGG

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