Working Life > Self-Employment > Liberal Profession

Working as a Liberal Professional in Germany

Definition, Explanation

Juristic definition of Liberal Profession (in German: Freie Berufe) is in German income tax act § 18 and in corporation and partnership act § 1. As a sum-up, one can say: Liberal professions are independently exerted scientific, artistic, writing, teaching, pedagogic, or very similar professions that are not subject to trade regulation act.

Those liberal professions also have the following characteristics: They are based on special professional qualification or creative giftedness. And they include the doing of services of a higher kind (furthermore in a personal, independent and professionally independent way) in the interest of the employers and the general public.

Rating of liberal professions as "listed professions"
In income tax act § 18 Abs. 1 Nr 1 and in corporation and partnership act, a list-like overview of professions is given that are doubtlessly to be counted as free professions. Including:

• Healthcare professions
  • doctors
  • dentists
  • veterinarians
  • alternative practitioners
  • physiotherapists
  • midwives
  • massage therapists
  • diploma-psychologists
• Legal-, tax- and economic-advice professions
  • lawyers
  • patent agents
  • notaries (except civil servants)
  • chartered accountants
  • tax advisers
  • "Steuerbevollmächtigte"
  • Advising economists and MBAs
  • licenced auditors (licenced CAs)
• Natural-scientific / technical professions
  • engineers
  • scientists
  • chemists
  • architects, city planners
  • pilots
  • regular-based working experts
• Communicating professions / cultural professions
  • journalists
  • photo reporters
  • interpreters / translators
  • artists
  • authors
  • designers
  • tutors / professors
  • teachers / pedagogues

Besides these "listed professions", German supreme tax court and legislation have defined a whole lot of other like-the-listed professions which were required to be congruent with one of the above in all main criteria and functions. Furthermore, the course of education leading to a profession, for its being rated as like-a-listed, must always be as high-level as for a liberal profession education.

In the federal republic of Germany, currently, there are slightly below a million free-lancers according to income tax law, making up 9 per cent of the gross domestic product.

A liberal professional has many advantages over a sole-proprietor / sole-tradesman. Liberal professionals according to income tax law do NOT have to

• register their trades
• become members of CCI (German IHK)
• pay turnover tax before receipt of money
• do double-entry bookkeeping

Furthermore, liberal professionals (in contrast to tradesmen) are not bound to any development plans for placing their business. They can, acc. to § 13 land use ordinance, settle in all area types except special areas, as long as they do not use more than 50 per cent of the building-area for their activity.

Exerters of liberal professions acc. to income tax law merely have to register at the revenue and pay income tax. The revenue decides according to the actual activity if it is free or trades-like. The listed professions count as free all the way. For example, a journalist's freelancership does not depend on whether he operates rather sole-trade-like or not, since it is a fixed free profession. That is not the case for professions that have developed lately and are not mentioned in income tax law and corporation and partnership law. The revenue tend to rating these trade-like, making them pay trade tax.

Colloquially, the term "liberal profession" is used often unprecisely, for describing a variety of "free" independent activities in which the worker (at first) acts for own account. Also overlaps with real, legal liberal professions. In legally incorrect uses, though, the "freiberuflich" (liberal profession) in Germany can mean something like the English freelancing or fee-based work. Also one-man sole-proprietors, subcontractors or a "Werksvertragstätigkeit" are often associated with the term "freiberuflich".

Tips, Checklist

• The following general characteristics helps you roughly classify your activity. Liberal profession
  
  • requires a higher education, creative giftedness or a large part of own funds in the activity
  • is not given for trade or mass production
  • requires that your own working (often service) is prominent, while in sole-proprietorship often the use of capital and high starting-investment are dominating
• In cases of doubt, consult a competent legal adviser if your activity is rated liberal profession
• Register your doing a liberal profession activity at the revenue office near your place of residence

Articles

• Plumbing for Joy? Be your own Boss; WSJ.com, September 15, 2009
• 35 online tools that make your freelance career easier; freelancefolder, May 14, 2009
• You're hired - next year; Economist, April 30th, 2009

Last update: 06/14/2010