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I am considering to work as a freelancing engineer additionally to my full-time employment, maybe even reduce the full-time employment and work more as freelancer. With my education I qualify as a german "Freiberufler", which has a special status.

What limits are there on billable hours, income, insurance, taxes, etc? I heard some rumours, but nothing to back them up, like for example:

  • freelance only 2-3 hours weekly, you don't have to pay health insurance for that
  • work too little, it is considered a hobby and you cannot deduce expenses
  • freelance more than 19.5 hours, it is full-time and you pay social taxes
  • earn more money than in your full-time job and something happens
  • you can earn a million working just one hour and you don't pay taxes
  • your third party insurance counts for freelancing too

Before I jump into the cold water, I would like to assess the possible risks and limitations that would come with the job. Answers with links to official laws would be great, but any hints in the right direction (even more rumours I have to evaluate) are welcome too.

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Bit late to the party, but:

  freelance only 2-3 hours weekly, you don't have to pay health insurance for that

Essentially yes: If you pay compulsory health insurance on your main job, that also covers a side job. This is even true if you freelance besides being househusband while covered by the family insurance.
Ask your health insurance about the exact limits, but IIRC 20 h/wk (15 h/wk if officially unemployed) is one. Below 400 EUR/month you'd anyways be like a mini jobber which can be done as side line.

work too little, it is considered a hobby and you cannot deduce expenses

That refers to income tax. I believe (but also rumours only) that this happens if you have prolonged times where you claim a net loss by deducing expenses which leads to lower total income. Which would mean that it is less a matter of how much you work than on how credible this is for earning money/how obviously you try to deduct stuff you really use for everyday life.

The tax office will cancel your freelancer status automatically, if you did not do anything and declare 0 income 0 gain for a couple of years (not sure how many exactly - but then it doesn't matter anyways, and just saves you hassle. Restarting the freelancing is easy: just fill out the form again, and in case you're not of a catalogue profession mention that this was considered freelancing before).

Note that as a freelancing engineer with a main job, e.g. professional books could either be deduced via the freelancing or via your "Werbungskosten". My guess would also be that there isn't that much discussion about software that can solely be used for engineering. Everyday software, and your computer that has "game" in its name will more probably cause trouble.

freelance more than 19.5 hours, it is full-time and you pay social taxes

Not sure what you mean with social taxes: as a freelancer you're decidedly not an employee, and besides the volountary obligatory health insurance (freiwillige Pflichtversicherung) you're yourself responsible for your social "insurance".
But yes, 20 h/wk is one limit that decides whether it is main or side business.

Note that it is not that easy to reach the 20 h/wk within the labour laws while having a 40 h/wk full-time job. If you get outside those, your main employer can assume that your work there is negatively affected by the side-business and that looses you your right to doing a side-job.

earn more money than in your full-time job and something happens

Difficult to answer without a claim what happens.

you can earn a million working just one hour and you don't pay taxes

Definitively not legally: the very first thing in order to start freelancing is to go to the tax office and fill in the start a business form saying "freelancer". They'll then approve of you belonging to one of the free professions, send you your new tax number and tell you that from now on you'll have to hand in compulsory tax declarations. And that's where you declare the million - and pay your tax for. The form does not ask how many hours you worked, it is exclusively concerned in the gain.

your third party insurance counts for freelancing too

My private third party liability insurance doesn't. A professional third party liability insurance does (should be for the correct profession!).

  • hey, thanks for the detailed answer. by wk do you mean week ? If that's the case, do you know if ones has a full-time employed job (40hours/week) and does 12hours/week freelancing does he have to pay the health insurance and the pension scheme twice ? – Blackbelt Jan 19 '16 at 17:59
  • @Blackbelt: wk = week, yes. IANAL, pension will depend on what kind of freelancing you do (e.g. if you are in a Kammer profession, ask your Kammer); health insurance: ask your health insurance. It does not only depend on the hours/week but also on the amount of money you earn that way. 12 h/week sounds like it could be covered by the main job health insurance. But 40 + 12 = 52 h / week is above the weekly work limit for employees. While as a freelancer you are not subject to the Arbeitszeitgesetz, your employer is responsible for the specified rest time (>= 11 consecutive h per day) ... – cbeleites supports Monica Jan 19 '16 at 18:50
  • and they may argue that being over the weekly limit for employees indicates that the freelancing will compromise your ability to do your main job (that is one key point for the decision whether you are allowed to do the side business or not). So make sure the 40 h employer is fine with the freelancing. – cbeleites supports Monica Jan 19 '16 at 18:54
  • Ok thanks for the info. Do you know if the vat costs something yearly or it is free and one pays taxes on the income? – Blackbelt Jan 19 '16 at 19:48
  • @Blackbelt: USt (VAT) is a sales tax. You have to declare it monthly unless you can negotiate longer time frames with the tax office. USt is completely separate from income tax, and you have to pay both. Maybe you should attend a lecture/seminar on business basics in Germany, many universities (exist programs) and the IHKs and local start up helping centers (Gründerzentren) as well offer such seminars. – cbeleites supports Monica Jan 20 '16 at 12:15
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The complexity of both Federal and Land taxes makes it imperative you should first of all talk to or visit your local tax office. Some activities of possible "Freiberufler", may be undertaken as 'employees' and not as 'free professionals'.

  • 1
    While it is true that he first needs to go to the tax office, that is not due to complexity: there's a law that says he has to do so. Members of a free profession can be employees like everyone else (which he is, considering he has a main job). OTOH I believe "Scheinselbständigkeit" will probably not be an issue for a true side business as all kinds of social security are paid through the main job. – cbeleites supports Monica Dec 6 '14 at 0:24

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