Are you newly solo self-employed or planning to become solo self-employed? Then you'll be interested in our guide to taxes and social security contributions for solo self-employed people!

What solo self-employment means

In Germany, there are various forms of self-employment, each of which has its own special tax and social security features. Solo self-employment differs from other forms of self-employment in that no other permanent employees are involved.

In contrast, general self-employed persons can employ staff and often also run a business. They are usually entered in the commercial register and are subject to various tax obligations, such as sales tax and trade tax.

Do you want to register a business as a self-employed person but don't need commercial space? Book the virtual office with us and enter the virtual address in the commercial register entry - it's possible! In this article you can find out everything you need to know about registering a business with a rented virtual office.

Freelancers, another category of self-employment, provide professional services that often require a higher level of qualification, such as doctors or freelance journalists. They benefit from a number of tax breaks, such as exemption from trade tax and simpler accounting rules. Freelancers can be solo self-employed if they do not employ any other staff.

Are you self-employed and looking for a professional workplace away from your own four walls? Then our co-working solutions - flexible workplaces or fixed workstations and permanently rented offices - may be just right for you!

Overview of tax types for solo self-employed persons

Solo self-employed people have a number of tax obligations to consider, which can vary depending on their specific business activity and income situation.

- Income tax: As a solo self-employed person, you are obliged to pay income tax on the income you earn. Income tax is calculated annually and is based on your net income, i.e. after deducting all business expenses from your gross income.

- VAT: Most solo self-employed persons are liable for VAT. This means that you have to charge VAT on the goods or services you sell and pay it to the tax office. However, there are exceptions and exemptions, such as the small business regulation. More on this below!

- Trade tax: Although many solo self-employed people are not subject to trade tax, especially freelancers, those who run a business may have to pay trade tax. The obligation to do so depends on the location of the business and the profit made.

Are you self-employed and value a professional image, but don't want to pay high rents for office space? With Office Club you can rent prestigious rent prestigious business addresses!

Small business regulation

The small business regulation is an important relief for solo self-employed persons with a low business volume. If your annual turnover does not exceed 22,000 euros and is expected to remain below 50,000 euros in the current year, you can be exempt from VAT via the small business regulation. This means that you do not have to show VAT on your invoices and you do not have to submit advance VAT returns. This regulation simplifies bookkeeping and can make administration considerably easier.

Small business regulation yes/no? Find out morein our article onsetting up a business!

For further information on these regulations and tax types, the Chamber of Industry and Commerce website, for example, offers detailed explanations and current updates on tax issues.

Solo self-employed without small business regulation

As a solo self-employed person without small business regulation, you are obliged to submit regular advance VAT returns and annual VAT returns. These declarations serve to inform the tax office of the turnover you have generated and the tax due on it.

Actual taxation vs. debit taxation: An important aspect of VAT is the choice between actual taxation and debit taxation. With actual taxation, VAT is only due once customers have actually paid your invoices. This can be particularly advantageous for solo self-employed persons who have to expect delays in payment from their customers. This contrasts with debit taxation, where VAT is already due at the time of invoicing, regardless of whether payment has been received or not.

Income tax and profit determination - difference between revenue-surplus accounting and double-entry bookkeeping

When it comes to income tax and profit determination as a solo self-employed person, you basically have two methods to choose from: the cash basis accounting (EÜR) and double-entry bookkeeping. The choice of method depends on the nature of your business activity and sometimes also on your turnover or profit.

Revenue-surplus accounting (EÜR): This method is simpler and therefore particularly popular with solo self-employed people who are not required to keep accounts. You determine your profit by simply comparing your operating income with your operating expenses. The EÜR is particularly advantageous if you want to prepare your tax return quickly and easily, as it requires less bookkeeping work.

Double-entry bookkeeping: This method is more complex and is usually used by larger companies or when certain turnover or profit limits are exceeded. With double-entry bookkeeping, you have to enter all business transactions twice - as a debit and a credit. This method gives you a more accurate overview of your financial situation and is particularly useful if you are planning a detailed financial analysis or loan applications.

Social insurance for solo self-employed persons

As a solo self-employed person, you are responsible for your own social insurance, which presents both challenges and opportunities to customize your coverage.

Health insurance: Health insurance is compulsory in Germany. As a solo self-employed person, you have the choice between statutory health insurance (GKV) and private health insurance (PKV). GKV is income-based and offers solidarity-based protection, while PKV contributions are calculated based on individual risk and the selected scope of benefits.

Pension insurance: You also need to take action when it comes to pension provision. Here you can either take out voluntary statutory pension insurance or rely on private pension measures such as private pension insurance. Statutory pension insurance offers the advantage of basic cover and potential disability pensions, while private pension plans often offer more flexible investment options and potentially higher returns.

Unemployment insurance: Membership of statutory unemployment insurance is voluntary for solo self-employed persons. By joining, they secure their entitlement to unemployment benefit I in the event of unemployment. The insurance can provide valuable protection, particularly in uncertain economic times, and the contributions are based on your income. One of the conditions for receiving unemployment benefit I is that you have been insured for at least 12 months in the past.

Additional tip: Künstlersozialkasse (KSK): If you work as an artist or publicist in Germany, the Künstlersozialkasse (KSK) can play an important role in your social security. Members must work creatively as their main occupation and their income determines the contribution amount. As a member, you benefit from the same social security benefits as employees, including health, long-term care and pension insurance. This offers you valuable protection. Further details are available directly from the KSK.

Common pitfalls in solo self-employment and how to avoid them

There are a number of stumbling blocks in the everyday life of solo self-employment that can easily be overlooked. A good understanding of these challenges can help you avoid mistakes and make running your business easier.

Typical tax return mistakes: Many solo self-employed people underestimate the importance of filing an accurate and timely tax return. Common mistakes include overlooking deductible expenses, incorrectly calculating VAT or failing to meet deadlines. To avoid such mistakes, it is advisable to be well informed, collect all receipts carefully and, if necessary, use professional tax software or consult a tax advisor.

Dealing with tax audits: A tax audit can be a stressful experience. Solo self-employed people should prepare for this by keeping their accounts regularly and correctly. It is important to document all business transactions transparently and keep receipts properly. This allows you to react quickly and efficiently in the event of an audit.

Legal pitfalls in solo self-employment: Legal challenges can range from compliance with specific industry regulations to contractual matters. Thorough preparation and understanding your obligations are crucial. It can be very helpful to seek regular legal advice to ensure that all activities remain within the scope of applicable laws.

Conclusion: Solo self-employment requires prudent management of taxes and social security. It is important to be aware of your tax obligations, from income tax to VAT, and to make effective use of the opportunities for social security through health, pension and unemployment insurance.

Equipped with the right information and resources, nothing stands in the way of your successful solo self-employed career!