Residence Permits and Being Self Employed in Germany

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Company Insurance in Germany

If you are considering becoming self employed while living in Germany, you will need a residence permit. In short, it is likely to be impossible to establish your business without one. Before you register as self employed, it is particularly advisable to consult experts for advice regarding residence permits and other important factors such as tax, labour and business law. 

If you are in a highly specialised profession and work as a scientist, doctor or professional expert in your field, it may be somewhat easier to obtain a residence permit. Even so, other qualified professionals should be able to obtain a residence permit, providing they meet certain criteria. Assuming that you can demonstrate how your business will benefit the German economy, you will almost certainly be issued a residence permit for yourself and your family automatically. Some of the criteria you may be expected to meet relate to:

  • Business type
  • Which qualifications you hold
  • Whether the role might be carried out by an existing resident or German national

You will probably be asked to supply particular documentation to the local Foreigners Office who may also consult the Chamber of Commerce or other related organisations to consider whether the business you propose to set up is both sufficiently specialised and economically viable. Assuming that you can provide the necessary documentation and that your business plan is approved by the relevant authorities, you may be issued a residence permit. Even so, it is worth noting that limitations could still apply in terms of the locality in which you can operate your business activities and these decisions will be made by the local authorities.

In addition, family members or spouses of expatriates that are seeking to become self employed or work in Germany must also take a number of steps in order to fulfil legal obligations. Once again, the residence permit plays a key role in terms of your work options. If your permit places restrictions on your working activities, you may need to seek expert help and legal assistance to see whether such restrictions can be removed or altered in order to allow you to start your business.

Foreign Qualifications

Requirements regarding qualifications can vary from country to country. When setting up you own business in Germany, you will need to make yourself familiar with which foreign qualifications are recognised in different professions. For more information on this subject, it is best to contact the German Federal government.

Classifying your Business

Once you’ve successfully applied for residency and met all the requirements of your business in terms of qualifications, it will be necessary to determine how your business might be classified. The regulations regarding classification depend on the type of business you are proposing to set up. Again, it is advisable to seek professional and expert opinion in order to establish the classification of your business.

The following section shows some examples of the different types of profession or business recognised in Germany:

‘Free-professionals’ (Freiberufler) are professionals who have academic qualifications, such as lawyers or doctors etc. Examples of professions considered as ‘crafts’ include butchers, hairdressers, florists and so on. Meanwhile, some professions fall under the category of ‘trades’. ‘Freelancers’ will include but are not limited to artists, writers, performers and independent consultants. The classification of your work is significant as it will likely affect your tax liability and the certificates and licences you may need to obtain. It may also have a bearing on whether you’ll need to be a member of a ‘chamber’ or other professional association.

If you intend to set up a business that is classified as Trade, you should contact the Gewerbeamt or local Commercial Office. Here you will probably be asked to register your business and obtain a certificate of registration (Gewerbeschein). To get this certificate you will have to demonstrate your reliability as an individual and show that you are qualified to run your business. It is worth noting that having a Gewerbeschein requires you to pay a local trade tax known as Gewerbesteuer. You will also be required to obtain membership to the local Chamber of Commerce (known as Industrie und Handelskammer – IHK) to whom you pay an annual membership fee.

Some registration procedures may not apply to Free professionals or indeed to individuals working in forestry or agriculture. Nonetheless this category may have other regulations it is required to follow.

Likewise, Freelancers have their own particular set of laws, regulations and procedures that should be adhered to and it is worth seeking advice on these.

Alternatively, Crafts businesses may need to be approved by a trade association and you will need to ensure that you meet the German standards regarding specific qualifications for your craft.

Seeking advice on becoming self employed in Germany is essential. Rules, regulations and procedures are ever-changing. It is highly advisable to seek professional assistance to avoid misunderstandings that could result in heartache and problems later on.

The following link from the German Federal Ministry for Economic Affairs and Technology provides some useful information (written in English) on starting a business: http://bit.ly/20etAzV

Alternative Circumstances:

Most legal foreign residents residing in Germany hold a standard residence permit obtained from the relevant German authorities. These allow them (and their families) to reside in Germany whilst employed by a German company or attending a German school. Residency is also usually granted to EU citizens and partners of German nationals where eligible. Nonetheless, there are a number of foreign residents in quite different circumstances living legally in Germany. Namely, uniformed military originally from the USA or from NATO countries are granted residency under SoFA (Status of Forces Agreements) as previously agreed upon with the German government. Likewise, civilians employed by defence ministries and similar departments, diplomats and those working for their country’s embassy or consulates (along with their family members) may also have this alternative status. Other persons who may be included in this status include foreigners working for German companies who have contracts with the diplomatic offices or foreign military of other countries. Finally, even some self employed residents may fall into this category.

Aspects that might raise questions for this group include, among other things, residence permits, tax status requirements, tax filing requirements, spousal employment, health insurance, eligibility for social benefits, German driver’s license and proper registration procedures. One such question is whether the spouse or partner of USA military personnel on active duty would be eligible for benefits in Germany if, for example, they took a job with a German company. Moreover, would this present particular issues regarding tax? Likewise if, for example, an individual from the UK, USA or Canada is working for a company based in their home country which holds a contract to carry out work in Germany, would there be health insurance issues or benefits to consider? These are just a few examples of the situations and queries that might be faced by people living in Germany under these ‘alternative’ circumstances.

It may seem complicated but there are specialised companies with in-depth, expert knowledge of these complex issues that can help guide you through the labyrinth of bureaucracy. These companies can ensure individuals are fully compliant with German regulations and are therefore able to take advantage of any benefits for which they might be eligible. If you think your situation could relate to any of these alternative circumstances, it may be advisable to contact qualified experts regarding such matters as law, accounting and tax who can offer you professional advice and assistance.

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