Which taxes does a self-employed person pay in Germany?
Income tax is levied on your net profit – that is, income minus all deductible business expenses.
The rate is progressive, starting at around 14% and going up to 45%, depending on your total taxable income.
It is not paid monthly, but via quarterly advance payments (Vorauszahlungen) set by the Finanzamt after your first tax return.
Annual tax-free allowance (Grundfreibetrag 2025):
In 2025, the first €11,604 of your taxable income are tax-free.
As a self-employed person, you are obliged to file an annual income tax return (Einkommensteuererklärung) via the ELSTER online portal.
Standard rate: 19%
Reduced rate: 7% for certain goods and services (e.g. some food items, books, cultural services).
VAT is charged on every invoice you issue to your clients – unless you are treated as a Kleinunternehmer (small business).
You may apply for the Kleinunternehmerregelung if:
your turnover in the previous year did not exceed €22,000, and
your expected turnover in the current year will not exceed €50,000.
If this applies:
You do not charge VAT on your invoices.
You do not file VAT returns (Umsatzsteuer-Voranmeldungen).
You are not allowed to deduct input VAT (Vorsteuer) from your own purchase invoices.
Gewerbesteuer applies to commercial activities (gewerbliche Tätigkeit), but not to Freiberufler (liberal professions).
There is a tax-free allowance of €24,500 in annual profit for sole traders and partnerships.
The exact rate depends on the local Hebesatz (municipal multiplier) where your business is registered.
Even though they are not taxes, social insurance contributions are an essential part of your running costs:
| Type of insurance | Mandatory? | Notes |
|---|---|---|
| Health insurance (Krankenversicherung) | Yes | Compulsory; can be statutory or private |
| Pension insurance (Rentenversicherung) | Often no | Mandatory only for specific professions (e.g. teachers, artists, certain caregivers) |
| Long-term care insurance (Pflegeversicherung) | Included in health insurance | Paid together with health insurance |
After your first year, the Finanzamt estimates your expected income and asks you to pay quarterly advances for:
Income tax (Einkommensteuer)
VAT (Umsatzsteuer) – if you are not a Kleinunternehmer
Trade tax (Gewerbesteuer) – if you are not a Freiberufler but a commercial trader
These advances are usually due four times a year.
A self-employed professional (Freiberufler) with an annual profit of €30,000 might face roughly:
| Tax / contribution | Approximate amount |
|---|---|
| Income tax | Around €3,000 – €4,000 |
| VAT (19%) | €5,700 charged to clients (from which you can subtract input VAT on your own business expenses) |
| Private health insurance | About €350 – €600 per month |
| Trade tax (Gewerbesteuer) | None, because Freiberufler are exempt |
| German term | Meaning in Arabic |
|---|---|
| Selbstständiger | العامل الحر / صاحب العمل الشخصي |
| Freiberufler | مستقل بمهنة حرة (كاتب، مهندس، طبيب…) |
| Einkommensteuer | ضريبة الدخل |
| Umsatzsteuer | ضريبة القيمة المضافة |
| Gewerbesteuer | ضريبة المهن / ضريبة الأعمال |
| Kleinunternehmerregelung | نظام الشركات الصغيرة المعفاة |
| Vorauszahlung | دفعة ضريبية مسبقة |
The editorial team of this website strives to provide accurate information based on extensive research and multiple sources. Nevertheless, errors may occur or some details may not yet be fully verified. Please treat the information in these articles as an initial orientation and always consult the competent authorities or qualified professionals for binding, final advice.
