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Saving taxes - a guide for the self-employed

In order to know how you can save taxes as a self-employed person, you also have to look at the various Tax types deal with. Here is an overview of the most important types of taxes that may apply to the self-employed:

Income tax

Regardless of whether someone gets their income from freelance work or a commercial enterprise - they pay income tax. This tax relates to the taxable profit of self-employment (Annual surplus). For the self-employed, this is usually the most important tax, because it can lower a lot of expenses of a company: If you reduce the taxable profit, the tax expenses of the self-employed decrease.

Sales tax and input tax

Also the value added tax is usually a duty for every self-employed person: Self-employed persons must generally levy sales tax (also known as value-added tax) on their goods or services, which they pay to the tax office. As a small business owner, you can also omit the sales tax: If the company's sales remain below a legally stipulated limit (currently at a previous year's sales of 17,500 euros), you have the option of the so-called Small business regulation to claim something. In this case, no sales tax will be charged. This primarily saves small businesses and authorities effort. However, if small companies primarily do business with end consumers (not with other companies), the small business regulation also gives them a competitive advantage: the final price of their products is lower for consumers, as they do not pay sales tax.

In this context, input tax should also be mentioned: The Input tax is not a separate tax type, but one Name for the sales tax that an entrepreneur applies to certain goods expends. Every company pays input tax as soon as it purchases essential goods or raw materials and automatically pays the resulting sales tax. It receives the amount back from the tax office by means of the sales tax advance notification. This is the so-called input tax deduction: the company has the right to deduct the input tax paid from its own sales tax payable.

But this concerns only companies that are also subject to sales tax. If you have been exempt from sales tax (small business regulation), sales tax is not even charged. In the digital guide you will find all the details on input tax and when the small business regulation is worthwhile.

Business tax

The trade tax only applies to those self-employed who have registered a trade to have. The determination and collection of trade tax are regulated in the Trade Tax Act (GewStG). The amount of tax that the business owner has to pay is determined by the tax office on the basis of the determined profit and set in the trade tax assessment notice. As a freelancer, you save the expense of this tax entirely.

income tax

Self-employed who employ workers, usually have the additional overhead of the monthly Income tax. As an employer, however, you only transfer this to the tax office for the employee - this means accounting work, but the tax expenses themselves are not borne by the freelancer or business owner, but by the employee.