Alberto wrote: ↑Wed Nov 20, 2024 5:29 pm
Beyond taxes as such, will she have to pay pension contributions? How to calculate this?
Normally, self-employed do not have to pay public pension contributions, but as a teacher she is an exception.
As long as her monthly freelance profit is
maximum 520€, she does not have to pay public pension contributions:
https://www.deutsche-rentenversicherung ... ehrer.html
- Whether you teach creative subjects, languages or sport, anyone who teaches on a freelance basis and earns more than €520 per month must make compulsory contributions to the statutory pension insurance scheme.
Even if the first thing that springs to mind is traditional tutoring, teaching is not limited to a specific area. What counts is the transfer of knowledge and skills in group or individual lessons, for example as a lecturer at an adult education centre, as a trainer for health or sports courses, as a teacher of creative courses or as a coach. Freelance teachers must register their work with the statutory pension insurance scheme within three months of starting.
Self-employed teachers who earn less than €520 per month do not have to pay contributions to the statutory pension insurance scheme. However, if they earn more than 520.01 euros per month, they are liable to pay pension insurance contributions. However, freelance teachers, trainers and coaches only have to pay these contributions as long as they do not have an employee subject to compulsory insurance. This also includes apprentices.
All the important information can be found in the free brochure ‘Self-employed - how pension insurance protects you’. It is available for download under this article.
If her monthly freelance profit is
at least 520.01€, she has to pay 18.6% of her freelance profit as public pension contributions because of § 2 Nr. 1 SGB VI:
https://www.gesetze-im-internet.de/sgb_6/__2.html
- The following are subject to compulsory (pension) insurance
1. Teachers and educators who, in connection with their self-employed activity, do not themselves regularly employ an employee subject to compulsory insurance,
Alberto wrote: ↑Wed Nov 20, 2024 5:29 pm
She will be working from home and there will be some obvious simple costs, internet connection (which we have anyway), computer, teaching materials, bla bla. Do I understand correctly these costs, can be (partly) offset against the income....?
Yes.
Do
not claim for a home office (part of purchase price depreciation, heating, electricity, water, and so on) for her self-employed activity, instead just claim the 6€ a day, maximum 210 day Home-Office-Pauschale that you can claim for even if you work at the kitchen table.
Why?
Because claiming for a home office in a house/flat that you own is a bad idea:
https://expertise.tax/en/german-tax-ref ... ible_costs
- A note of caution: if you are self-employed and own this flat/house, working from home will turn that room from “private asset” to “business asset”, which means that when you stop working from home, e.g. because you stop working in that room because you move your business into bigger rented offices or because you sell your home, the Finanzamt will come and make you tax the increase in value of that room as income, at your own personal income tax rate of up to 42%. So if you live in a region with rising real estate prices, you may want to put a guest bed into your office, just to make it ineligible as a home office and to not have the Finanzamt ask for its share in the increase in value of your home. Of course, this means foregoing claiming for the home office as a business expense, but in a fast rising real estate market, that may be more advantageous than taxing the increase in value on that home office.
If you are 55 years or older, there is a special tax-free allowance for giving up/selling your business of 45,000€ in §16 (4) EStG, which you can use when stopping to work from your home office. So if you plan to work to over age 55 and think the increase in value of your home office will only be up to 45,000€, by all means work from home and claim for the costs, even if you work self-employed.
Alberto wrote: ↑Wed Nov 20, 2024 5:29 pm
Will she needs bookkeeping? And having to keep them for ...xyz... years in case they ask?
She will need to do a profit calculation, she does not have to do double-entry bookkeeping.
So an Excel spreadsheet will do for her.
She will have to transfer the results from her Excel spreadsheet, e.g. sum of all telephone costs 132.56€ into the tax form "Anlage EÜR", that's the part of the tax return where her freelance profit gets calculated.
Alberto wrote: ↑Wed Nov 20, 2024 5:50 pm
Right now I am tax class 3. What class should she/we opt?
She will be self-employed.
Only employees have tax classes, since only they draw wages.
The full name in German of the tax class is "Lohnsteuerklasse", i.e. wage tax class.
--> if she were to become an employee, she would have tax class 5.
But as a self-employed, after the first tax return in which she has self-employed income, the Finanzamt will set quarterly income tax prepayments for her.
Alberto wrote: ↑Wed Nov 20, 2024 5:50 pm
Do I understand correctly that it will remain better to file tax together?
Yes.
Alberto wrote: ↑Wed Nov 20, 2024 5:56 pm
When she travels to Japan, can this count towards her business expenses, like visiting her customers who happen to be there?
She needs to spend at least 10% on business to be able to claim a part of the air travel fare.
And she will need
proof for the days that she will spend on business, e.g. the e-mails setting up the appointments with her clients.
For example, if she visits Japan for 14 days and she only has 2 days of appointments, then only 2/14 of the travel cost is a business expense, and she only gets to claim per diems for additional meal costs (Verpflegungsmehraufwand) as business expenses for those 2 days:
https://www.bundesfinanzministerium.de/ ... onFile&v=1
Please see here:
https://www.haufe.de/finance/haufe-fina ... 44929.html
- Travelling expenses, division into business and private ... / 4.4 Business trip if the private co-incidence is less than 10% (de minimis limit)
Mixed expenses can only be split if the business or professional share of the expenses is at least 10%. If the business or professional share is less than 10%, the general costs may not be apportioned and deducted as business expenses. In the opposite situation, where the private co-incidence is less than 10%, all expenses may be deducted as business expenses, provided there are no other legal restrictions.
Expenses that are incurred exclusively for business or professional reasons can also be deducted in full as business expenses or income-related expenses if the business reasons are otherwise of secondary importance.
Practical example
Holiday trip with one-day specialist seminar
An entrepreneur takes part in a one-day specialist seminar during his 14-day holiday trip. The specialist seminar is of minor importance (less than 10% of the total stay), so that the travel costs to the holiday destination and the accommodation costs cannot be deducted as business expenses, not even partially.
What the entrepreneur can deduct in full are
- the seminar fees,
- the costs of travelling from the holiday destination to the seminar venue and back and
- if applicable, a lump sum for additional subsistence expenses.