Taxes Freelancers Pay in Germany [2026]

Key takeaways

• Self-employed and freelancers in Germany pay income tax (Einkommensteuer), trade tax (Gewerbesteuer), and VAT (Umsatzsteuer).
• Income tax is mandatory for all residents. Germany uses a progressive tax rate where each additional euro earned is taxed at a higher rate.
• Trade tax applies to commercial enterprises. Freelancers are exempt unless they provide commercial services.
• It’s crucial to reserve funds throughout the year to cover your tax bill.
• Sole proprietors and partnerships receive an annual allowance of €24,500 (as of 2025) for trade tax. You only pay trade tax on profits exceeding this amount.
• Deadline for advance income tax payments is March 10, June 10, September 10, and December 10
• The deadlines for advance trade tax payments are February 15, May 15, August 15, and November 15.

This is how you do it

• Use the tax table or tax calculator to find the money you should set aside each month. For example, if you’re single, earning €50,000, set aside 21.4% of your monthly income for taxes.
• If you make losses, offset them against other income sources (like employment income), carry forward to next year to reduce future taxes, or carry back to the previous year to claim a tax refund.
• Every municipality sets its own trade tax rate.
• Offset the trade tax from the income tax. This reduces your tax burden.

Table of Contents

As a freelancer and self-employed, you pay the following types of taxes in Germany.

• Income tax (Einkommensteuer)
• Trade tax (Gewerbesteuer)
• VAT (Umsatzsteuer)

Income tax

Every resident in Germany is required to pay tax on their income. Your nationality, age, profession, and gender don’t play any role. If you live in Germany for more than six months a year, the tax office considers you a resident.

How is the income tax calculated?

Here are the steps the tax office takes to calculate the tax.

• Calculate your total gross income from all sources.
• Deduct tax allowances from your gross income. Germany offers a lot of tax allowances (Freibetrag) and Relief amounts (Entlassungsbetrag) to reduce your taxable income. The tax office automatically deducts most of these allowances before calculating the income tax.
• Deduct all income-related expenses and other expenses to reduce your taxable income further.
• Deduct child allowance and hardship allowance if applicable. The tax office deducts them automatically.
• Your taxable income is the income left after deducting all the expenses and allowances.
• The tax office adds the income tax rate to your taxable income to calculate your income tax.

What is the income tax rate in Germany?

The income tax rate in Germany is progressive. This means the more you earn, the more tax you pay.

In a progressive tax rate, every euro you earn is not taxed equally. Instead, every additional euro is taxed at a higher rate than the previous one. 

The actual tax calculation is complex, and it’s best to use a tax calculator to find the exact tax burden. You can use the official tax calculator by the tax office here.

You can also use the tax table published by the tax office every year to find out your approximate tax burden. This will help you determine how much money you should set aside for paying taxes later.

Here is the tax table for your reference.

Taxable income in €	Income tax in € Filing tax separately (Grund) / Jointly (Splitting)	Average tax rate in % (Grund/Splitting)	Marginal tax rate in % (Grund/Splitting)
bis 12.096	0 / 0	0,0 / 0,0	0,0 / 0,0
20.000	1.639 / 0	8,2 / 0,0	24,9 / 0,0
30.000	4.303 / 970	14,3 / 3,2	28,4 / 19,4
40.000	7.320 / 3.278	18,3 / 8,2	31,9 / 24,9
50.000	10.691 / 5.854	21,4 / 11,7	35,5 / 26,6
60.000	14.415 / 8.606	24,0 / 14,3	39,0 / 28,4
70.000	18.488 / 11.536	26,4 / 16,5	42,0 / 30,2
80.000	22.688 / 14.640	28,4 / 18,3	42,0 / 31,9
90.000	26.888 / 17.922	29,9 / 19,9	42,0 / 33,7
100.000	31.088 / 21.382	31,1 / 21,4	42,0 / 35,5

The table shows you how much tax you will pay, based on your income and whether you file your tax return separately (Grund) or jointly (Splitting) with your partner. 

You should also understand what the average and marginal tax rate means. 

As you are aware, the tax office employs a progressive tax rate. So, the average tax rate tells you the average percentage of tax you pay on a certain income. 

On the other hand, the marginal tax rate shows how much tax you pay on every euro you earn above a certain level. 

Example: Average tax rate for singles earning 50k is 21.4%. On the other hand, every euro you earn above 40,000€ is taxed at the marginal tax rate of 35.5%. Similarly, every euro earned above 50,000€ is taxed at the marginal tax rate of 39%.

You can use the average tax rate to determine how much money you should set aside to pay the taxes later. You can use the marginal tax rate to determine how a new income or expense will increase or reduce your tax burden.

Ultimately, you must know how much to set aside to cover the taxes at the end of the year.

How much tax reserve should you build up to pay the taxes at the year-end?

Answering this question is crucial for you as a founder. You don’t want to be in a situation where you have a tax bill of 20,000€, but no money to pay it.

You can calculate the amount you must set aside in two ways.

• Use a tax calculator to calculate the approximate tax you’ll pay. 
• Use the tax table above to find the approximate tax you’ll pay.

Based on the approximate tax you calculated, set aside a portion of the profits each month.

Let’s understand with an example.

Suppose you are single and expect to have a profit of 50,000€. In this case, you’ll pay around 10,691€ in taxes as per the table above. In other words, set aside 21.4% of your monthly income for taxes.

Save taxes by carrying forward or carrying back the losses.

During the initial startup phase, it’s more probable that you’ll make losses. However, you can carry forward or back these losses and save taxes.

Suppose you incur losses in 2025. In this case, you have the following options.

• Use the losses to reduce the income from other sources (e.g., employment).
• Use the losses to offset your spouse’s income.
• Carry forward the losses to next year (i.e., 2026 in this example). This way, you can deduct these losses from your future income (i.e., income in 2026 in this example).
• Carry back the losses to the previous year (i.e., 2024 in this example) and claim a tax refund. This way, you can request a tax refund from the tax office by deducting your current year’s losses from the previous year’s income.

You can decide what makes most sense for you (carry forward or carry back). 

List of expenses you can deduct from your taxes in Germany ->

List of tax allowances and flat rates to reduce the tax burden in Germany ->

Deadline for paying income tax

Filing a tax return is mandatory for every self-employed person in Germany. It doesn’t matter if you made a profit or not.

The deadline for filing the income tax return is

• 31st July of the following year (without a tax advisor)
• 01 March of the year after the following year (with a tax advisor)

Example: Deadline to file 2025 tax return is 31 July 2026 (without a tax advisor) and 01 March 2027 (with a tax advisor).

The tax office doesn’t want to wait until the end of the year for its share. Thus, it demands that you make advance tax payments every quarter. 

The deadline for advance income tax payments is

• March 10, 
• June 10, 
• September 10, and 
• December 10. 

Trade tax (Gewerbesteuer)

Your municipality charges trade tax. The revenue from the trade tax goes directly to your municipality. 

The purpose of the trade tax is to compensate for the infrastructure burden caused by the settlement of a commercial enterprise.

The trade tax is regulated by the Gewerbesteuergesetz (GewStG).

Who pays the trade tax?

Legal forms that are subject to trade tax in Germany.

• All commercial enterprises (Gewerbe).
• All corporations (GmbH, UG, AG).

Businesses with the following legal forms are exempt from paying trade tax in Germany.

• Freelancers (Freiberufler)
• Enterprises in agriculture or forestry

As a freelancer, you may become liable to pay trade tax in the following situation.

• You provide commercial services alongside your freelance work (e.g., a dentist who also sells dental care products via an online shop).
• You organise your business like a commercial enterprise (e.g., setting up a branch with employees).

Different legal forms in Germany ->

How to choose a legal form in Germany ->

How much is the trade tax?

Each municipality determines the trade tax that businesses operating within that municipality must pay. Sole proprietors (Einzelunternehmer) and partnerships (Personengesellschaften) get an annual allowance of 24,500€ (as of 2025).

This means if your profit is below the annual allowance, you don’t pay any trade tax. You only pay trade tax on the profit that exceeds the allowance of 24,500€ (as of 2025).

How is the trade tax calculated?

1. Your business profit is the starting point. You determine your profit via two ways: the income-and-expenditure accounting method (EÜR) or the profit and loss statement (GuV).
2. Make compulsory additions (“Hinzurechnungen”) and subtractions (“Kürzungen”) to derive the “Gewerbeertrag” (trade income). You add as per §8 GewStG and subtract as per §9 GewStG. You don’t have to learn what you must add or subtract. Your tax advisor or tax software will handle it.
3. Subtract the annual allowance (24,500€ as of 2025)
4. Subtract loss carry-forward (if any)
5. Multiply the result by the tax base rate (Gewerbesteuermesszahl) of 3.5% (as of 2025). This gives you the trade tax assessment amount (Gewerbesteuermessbetrag).
6. Multiply the “trade tax measurement amount” by the municipality’s assessment rate (Hebesatz). This is the trade tax you must pay.

Example

	Calculation Step	Sole Proprietor / Partnership	Corporation (e.g., GmbH, UG)
	Business Profit	€100,000	€100,000
(+)	Additions as per §8 GewStG	0	0
(-)	Subtractions as per §9 GewStG	0	0
(=)	Trade income (Gewerbeertrag)	€100,000	€100,000
(-)	Annual Allowance (Freibetrag)	€24,500 (as of 2025)	No allowance
(-)	Loss carry forward  (Verlustvortrag Gewerbeertrag)	€0	€0
(=)	Tax-relevant trade income	€75,500 (100k – 24,500)	€100,000
(x)	Trade tax base rate (Gewerbesteuer-messzahl)	3.5%	3.5%
(=)	Trade tax assessment amount (Gewerbesteuer-messbetrag)	€2,642.50 (75,500 x 3.5%)	€3,500 (€100,000 × 3.5%)
(x)	Municipality’s assessment rate (Hebesatz)	410% (Berlin)	410%
(=)	Trade tax payable	€10,834.25 (€2,642.50 × 410%)	€14,350.00 (€3,500 × 410%)

In the above example, a sole proprietor pays 10,834€ and a corporation pays 14,350€ in trade tax.

Trade tax return and advance payments in Germany

Here is how your trade tax return works.

• You submit your trade tax return to the tax office.
• The tax office determines the “trade tax assessment amount” (Gewerbesteuer-messbetrag) and issues the “trade tax assessment notice” (Gewerbesteuermessbetragsbescheid).
• The tax office informs the relevant municipality about your trade tax assessment amount.
• The municipality adds its assessment rate (Hebesatz) and determines the trade tax payable.
• You must pay this trade tax to the municipality.

Advance payments

In the first two years of your business, your trade tax liability is calculated based on your answers in the Fragebogen zur steuerlichen Erfassung.

Afterwards, the trade tax is calculated based on your previous year’s tax assessment (Steuerbescheid).

Suppose the tax office determines a trade tax liability. In this case, you are automatically obligated to make quarterly advance payments of the trade tax for the following fiscal year. 

Deadline for paying trade tax

The deadline for trade tax advance payments is

• February 15,
• May 15,
• August 15, and
• November 15.

NOTE: The deadlines for advance payments of income tax and trade tax are different. Sometimes, new founders confuse these deadlines. This is why using a good accounting software or tax advisor is recommended.

Best accounting software in Germany ->

English-speaking tax advisor for self-employed in Germany ->

The deadline for filing the trade tax return.

You file your trade tax return together with your income tax return. So, the deadlines for trade tax returns are the same as those for a tax return, which is

• 31st July of the following year (without a tax advisor)
• 01 March of the year after the following year (with a tax advisor)

Example: The trade tax return deadline for 2025 is 31 July 2026 (without a tax advisor) and 1 March 2027 (with a tax advisor).

Deducting trade tax from income tax

You can offset the trade tax against your income tax. Here is how much you can offset.

Trade tax you can offset from income tax = Trade tax assessment amount (Gewerbesteuer-messbetrag) × 3.8 

Example: 

Income tax on 100,000 € (Single individual)	31,100€ (approx.)
Trade tax assessment amount (Steuermessbetrag)	2,642.50€ (from table 1)
Deductible trade tax amount	10,041.50€ (2,642.50€ x 3.8)
Income tax payable	21,058.50€ (31,100€ – 10,041.50€)
Actual trade tax paid	10,834.25€ (from table 1)
The extra trade tax you paid on top of income tax	€10,834.25 – 10,041.50€ = 792,75€

VAT

You can learn everything about VAT here.

References

• https://finanzamt-bw.fv-bwl.de/,Lde/Startseite/Service/Welche+Fristen+muss+ich+bei+der+Gewerbesteuer+beachten_
• https://www.steuertipps.de/finanzamt-formalitaeten/aktuelle-einkommensteuertabellen-grundtarif-und-splittingtarif