Deductible Business Expenses for Freelancers and Self-Employed in Germany
Taking advantage of all business deductions is crucial to business profitability, whether if you are a freelancer or a self-employed individual. Business expenses are our costs, and being on top of our accounts is good to save money and also grow our profits.
The majority of online entrepreneurs operate their businesses from their homes, especially during lockdown times. They advertise their services using social media and Google. They buy software such as Canva or Photoshop, domain names and hosting for their websites. They outsource their web designers, and social media managers or take courses to improve their skills. Unfortunately, many self-employed people do not even know what they can deduct from their taxes in Germany.
Today, we will be listing down 6 business expenses you can write off from taxes as an online business owner in Germany. However, it is important to note that you will need to prove the fees and costs for all these items to make use of the deductions. This means keeping all receipts in an orderly fashion and presenting the proof of purchases when required. The German tax authorities can decide to audit your business several years after a financial year has passed.
1- Home Office
Tax law in Germany mentions that working from home normally only qualifies for rebates if one room in the house is used exclusively as an office. This means, if you use a space in your home exclusively for the business, you can make use of a tax deduction for this portion of your house rent. However, if you have a working space in your living room or if you use your kitchen table for work, you cannot show this as a business expense because the space has to be used exclusively for work.
2- Business Websites
As you can deduct all business-related costs, business websites are also included in this list. This could be hiring someone for the design and development of your website, creation of website copy or ongoing website maintenance costs. Besides, the purchase of domain name and web hosting for your business website, and the internet costs can also be claimed.
In short, if you use your website for business purposes, you can deduct the costs for tax purposes. Regardless of whether you have one or more websites and what kind of website it is.
3- Training & Conferences
Business-related courses and conferences are great ways to improve your skills. The online business world evolves quickly, therefore a lot of business owners need to be constantly learning.
The good news is, that you can deduct your training, coaching, and seminar costs from tax in Germany. The important thing is, that the training needs to have a professional connection. Signed up for Skillshare or Udemy to improve your business skills? Keep your receipt for tax purposes.
This could also be used to learn the German language in Germany. As learning German is a big advantage to work in Germany, you can deduct the cost of your language lessons as a business expense.
4- Advertising Costs
Advertising, production of advertising material, and all kinds of business advertising can be deducted from your taxes. Running ads on Facebook, LinkedIn or Google? Considering local sponsorships, giveaways or printed ads? You can deduct these costs as business expenses.
5- Office Equipment
All office gadgets such as laptops, routers, cameras, business phones etc. can be claimed if you use these exclusively for your business. This operationally used hardware can be specified as operational expenditure.
It’s important to note that computers, monitors, scanners, printers and even the mouse must be written off over a period of three years using the official depreciation table on the Ministry of Finance’s website.
Whether you’re a German citizen or a foreigner, you are required by law to pay taxes if you earn money while living or working in Germany. If you run your own business or are self-employed in Germany, you will be required to submit an annual tax return to work out your income tax.
However, dealing with tax affairs when you have a business to run might be a headache. If you’re not familiar with the German tax system, it might be a good idea to talk to a tax advisor so that you can get more information about writing off business expenses, paying the correct taxes and avoiding penalties.