There are two types of self-employed professionals in Germany: traders and freelance professionals. As a freelancer, you are required to issue invoices for your goods and services, just like businesses. This article explains what freelancers are and what information their invoices need to include to be compliant. We also explain how freelancers can use Stripe to create invoices and what you need to know about invoicing and sales tax, including value-added tax (VAT).

What’s in this article?

• What are freelance professionals?
  
• What information is required on an invoice?
  
• How can freelance professionals create invoices with Stripe?
  
• What do part-time freelance professionals need to consider when issuing invoices?
  
• What do freelancers need to know about VATvalue-added tax to create invoices?
  

What are freelance professionals?

In Germany, freelance professionals are self-employed people who practice a specific profession on a freelance basis. These “catalogue professions” are listed in Section 18 of the Income Tax Act (EStG). They differ from traders in that they are not subject to trade tax and do not require business registration. The following professions, among others, are defined as freelance professionals under the Income Tax Act:

• Physicians
  
• Dentists
  
• Physiotherapists
  
• Alternative medicine practitioners
  
• Psychologists
  
• Veterinarians
  
• Lawyers
  
• Patent lawyers
  
• Notaries
  
• Engineers
  
• Surveyors
  
• Commercial chemists
  
• Auditors
  
• Chartered accountants
  
• Tax advisors
  
• Tax agents
  
• Consulting economists and business economists
  
• Artists
  
• Journalists
  
• Writers
  
• Photojournalists
  
• Interpreters
  
• Translators
  
• Lecturers
  
• Teachers
  
• Early childhood educators
  
• Scientists
  
• Pilots
  

What information is required on an invoice?

When you create invoices as a freelance professional, the requirements and regulations under Section 14 of the VAT Act apply, as they do for all German businesses. An invoice is any document used to bill for a product or service, regardless of what this document is referred to in business transactions (see Section 14, Paragraph 1). A legal invoice must contain several mandatory details. If this information is missing, the invoice might be formally invalid. Below, you will find all the mandatory information you need to consider when creating an invoice as a freelancer according to Section 14, Paragraph 4 of the VAT Act:

• Complete name and address of the business providing the product or service
  
• Complete name and address of the recipient of the product or service
  
• Date of the invoice
  
• The date of delivery of the product or service
  
• The tax number issued to the performing business by the tax office or the VAT identification number issued by the Federal Central Tax Office
  
• A consecutive, unique invoice number
  
• The quantity and type of products delivered or the scope and type of service provided
  
• The total amount for the delivery or service broken down according to tax rates and exemptions
  
• The relevant tax rate and the tax amount applicable to the total amount or a reference to a tax exemption
  

In addition to this legally required information, we recommend adding this information to your invoice for a smooth payment flow:

• Order number and/or customer number of the service recipient (if available)
  
• Rebate or cash discount (if applicable)
  
• Specific payment date or a payment deadline
  
• Valid bank details of the providing business with international bank account number (IBAN) and bank identifier code (BIC)
  
• The payment conditions (i.e., information about permitted payment methods)
  
• Contact information for inquiries
  

Find out more about invoicing in our article.

How can freelance professionals create invoices with Stripe?

For freelancers, invoicing can be challenging for several reasons, especially when compared with larger businesses or those with a fixed administrative infrastructure. Freelancers often have to juggle many business responsibilities, leaving little time for bookkeeping. Routine invoicing can also be lacking, especially with irregular jobs. For example, without invoicing software, there might be an error in the required sequential invoice number. In addition, freelancers often work for different clients, which means different billing models can complicate invoicing. Finally, not all freelancers have administrative skills. In particular, tax and legal requirements can be challenging.

As a result, it is a good idea to get help: Stripe Invoicing is a global financial infrastructure platform for flexible invoicing. Invoicing automates and speeds up your accounting processes so you can send invoices quickly. Simply enter product and customer information. You can set the tax rate or have it automatically determined. You can also personalise the invoices with your logo and colours, and you can use the created template for new invoices.

You can then send your customers a PDF invoice or a link to a Stripe-hosted invoice page. All invoices are optimised for mobile, tablet, and desktop use with a responsive design that supports Apple Pay, Google Pay, and more. Invoicing offers more than 25 languages, 135 currencies, and over 100 payment methods, from which your customers will see a selection based on location.

The Invoicing dashboard lets you manage your invoices and access detailed reports. You can also update, highlight, cancel, duplicate, or get a refund for invoices paid outside Stripe. Other features include the ability to automatically track open invoices, collect payments, and reconcile transactions.

What do part-time freelance professionals need to consider when issuing invoices?

When freelancers issue invoices, it does not matter whether they work full time or part time. In both cases, invoices must contain all the information required by Section 14(4) of the VAT Act. There is also no obligation to indicate a part-time activity when issuing invoices.

However, part-time freelancers should look closer at whether they can take advantage of the small entrepreneur rule (see below). Because they usually generate less turnover than full-time freelancers, they might fall below the relevant turnover thresholds.

What do freelancers need to know about VAT to create invoices?

In Germany, freelance professionals are obliged to charge VAT on products and services to pay the tax office. Invoices must state the net price of a product or service as well as the applicable tax rate and the resulting tax amount. This is added to the net price and results in the total amount.

There are three possible tax rates. If you create an invoice as a freelance professional, you should know which tax rate applies to your activities. The majority of products and services in Germany are taxed at the standard rate of 19%. However, a reduced tax rate of 7% is applied to some everyday goods and services. Section 12 of the VAT Act lists the transactions to which this regulation applies, including medical supplies, basic foodstuffs, and the use of public transport.

A few goods and services are also exempt from sales tax. This is equivalent to 0% VAT. Section 4 of the VAT Act lists 29 such exceptions. Medical and nursing services, educational services, and the renting and leasing of real estate are exempt from sales tax. You can find more information on Section 4 of the VAT Act in our article. Because of a newly introduced paragraph in Section 12 of the VAT Act, the supply of solar modules and essential components of photovoltaic systems and storage systems is also reduced to 0% and is exempt from VAT. However, this applies only if the installation is planned on or near private homes or public buildings.

If you are exempt from VAT on certain services because of the nature of your business as a self-employed person, you must include a brief written statement on your invoices. The purpose is to justify the exemption with reference to the specific section and paragraph of the VAT Act. In addition to paragraphs 4 and 12, your reference to tax exemption can also refer to Section 19 of the VAT Act – this would mean you are a small-scale entrepreneur.

Small businesses

As a freelancer, you have the opportunity to adopt the status of a small business. However, this requires that your annual turnover does not exceed €22,000 in the previous year and €50,000 in the current year. If you are below these turnover limits, you might be exempt from VAT as a small business – regardless of what goods your business sells or what services it provides. Small businesses show only a net amount on their invoices and include a written statement such as, “As a small business, no VAT is charged in accordance with Section 19(1) of the VAT Act.”