In Germany, the decision that matters most upfront has less to do with legal structure than with a single classification question: are you a Freiberufler, a freelance professional, or a Gewerbetreibender, someone conducting a commercial trade? That distinction alone determines whether the local trade office ever enters the picture, and it colors your tax situation from the outset. Here's how it plays out in practice for 2026.
1. Freiberufler, Einzelunternehmer, or GmbH
What you're allowed to call yourself, and what that means for registration, breaks down roughly like this.
- Freiberufler (freelance professional). A defined list of regulated and creative professions, consulting, writing, design, medicine, law among them, is legally excused from trade registration and trade tax altogether. Whether a given line of work actually qualifies isn't always clear-cut; the Finanzamt makes the call on borderline cases.
- Einzelunternehmer (sole proprietor). The fallback for commercial activity that doesn't meet the freelance bar. Legally you and the business are one entity, and liability is unlimited and personal.
- UG or GmbH. Both structures cap liability. A UG (mini-GmbH) can be set up with as little as €1 in share capital, while a full GmbH requires €25,000 in share capital, with at least €12,500 actually paid in before registration goes through. Notarization is mandatory for either.
2. Registering the business
Freiberufler
The trade office never enters the picture. Registration happens directly with your local Finanzamt via the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung), and there's no charge for it.
Einzelunternehmer, UG, and GmbH
A Gewerbeanmeldung filed at your local trade office (Gewerbeamt) is the starting point, costing anywhere from €15 to €65 depending on the city, and several major cities, Berlin, Hamburg, Munich, Cologne, and Frankfurt among them, now let you file this online. Forming a UG or GmbH adds two earlier steps before that filing: notarizing the company's formation documents (a standardized Musterprotokoll runs roughly €800 all-in for a straightforward GmbH, while a custom Gesellschaftsvertrag costs more), and entering the company into the Handelsregister (commercial register) through the local Amtsgericht, which carries its own separate court fee of around €150. Start to finish, from decision to a functioning company, the sequence usually takes 3 to 6 weeks.
3. Getting your Steuernummer
A Steuernummer (tax number) from your local Finanzamt costs nothing and comes out of the same tax registration questionnaire that every Freiberufler, sole proprietor, UG, and GmbH files. Businesses that will charge VAT will also want a USt-IdNr (VAT identification number), issued separately, and also free, by the Bundeszentralamt für Steuern.
4. Licenses and permits
There's no single license that covers running a business across Germany. What's required hinges on industry and city: regulated trades generally need registration with the local Handwerkskammer (chamber of crafts), sectors like food service and childcare carry their own permits, and local authorities sometimes layer on additional requirements. Your Gewerbeamt is the right place to confirm anything specific to your industry.
5. Income tax, trade tax, corporate tax, and VAT
Freiberufler and sole proprietors pay personal income tax (Einkommensteuer) on a progressive scale running from 14% up to 42%, topping out at 45% for the highest incomes, with no tax due at all on the first €12,348 of income for 2026. A 5.5% solidarity surcharge only kicks in once the income tax bill itself passes roughly €20,350 for a single filer, so it touches a minority of higher earners rather than everyone.
Commercial activity, whether run as a sole proprietorship, UG, or GmbH, also owes trade tax (Gewerbesteuer), a municipal tax carrying a €24,500 tax-free allowance for sole proprietors and partnerships. The calculation multiplies a 3.5% base rate by a municipal multiplier ranging from 200% to 900%, landing on an effective rate anywhere from about 7% to 17% or higher depending on location; sole proprietors can credit part of this back against income tax. Freiberufler sidestep trade tax entirely.
GmbHs and UGs pay corporate tax (Körperschaftsteuer) at a flat 15%, plus a 5.5% solidarity surcharge calculated on that figure, in addition to the same trade tax described above. Put together, the combined corporate tax burden usually falls somewhere between 23% and 33%, averaging close to 30% nationwide.
VAT (Umsatzsteuer, though still commonly called by its older name Mehrwertsteuer) sits at a standard 19%, with a reduced 7% rate covering items like books, food, and local public transport. Very small operations can skip charging VAT altogether under the Kleinunternehmerregelung (small business exemption), provided revenue stays under the applicable threshold.
6. Staying compliant
Every Gewerbetreibender, UG, and GmbH files an annual trade tax return (Gewerbesteuererklärung) through ELSTER, the national electronic tax filing system. GmbHs and UGs additionally file an annual corporate tax return and publish their annual financial statements (Jahresabschluss) to the Bundesanzeiger, the electronic federal gazette, a requirement that's both mandatory and publicly searchable. VAT returns go in monthly or quarterly, depending on turnover.
Germany business costs at a glance
| Item | Cost |
|---|---|
| Freiberufler registration (Finanzamt only) | Free |
| Gewerbeanmeldung (sole proprietor/commercial) | €15 to €65 |
| GmbH notarization + Handelsregister entry | ~€800 to €2,000+ |
| GmbH minimum share capital | €25,000 (€12,500 paid in) |
| UG minimum share capital | From €1 |
| Steuernummer / USt-IdNr | Free |
| Corporate tax + solidarity surcharge (GmbH/UG) | ~15.8% |
| Trade tax (Gewerbesteuer) | ~7% to 17%+ depending on municipality |
| VAT (standard rate) | 19% |
Frequently asked questions
What's the difference between a Freiberufler and a Gewerbe in Germany?
Freiberufler covers certain regulated and creative professions exempt from trade registration and trade tax. A Gewerbe (commercial trade) requires registering at the local trade office and paying trade tax on top of income tax.
How much capital do I need to start a GmbH in Germany?
€25,000, with at least €12,500 paid in before registration. A UG (mini-GmbH) can start with as little as €1.
How long does it take to register a business in Germany?
A Freiberufler can register the same day directly with the Finanzamt. A GmbH or UG typically takes 3 to 6 weeks once notarization and Handelsregister entry are included.
What's the corporate tax rate for a GmbH in Germany?
A flat 15% corporate tax plus solidarity surcharge (about 15.8% combined), plus municipal trade tax that varies 7% to 17% or more by location, for a combined burden typically between 23% and 33%.
Do freelancers in Germany pay trade tax?
No. Freiberufler are exempt from trade tax (Gewerbesteuer) entirely, unlike sole proprietors carrying out commercial activity.
Fees and rates above come from the Finanzamt, local Gewerbeämter, and the Bundeszentralamt für Steuern as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a German-qualified Steuerberater or lawyer about your specific situation.