Freelancing in Canada and freelancing in Germany are very different beasts.
While I’ve just started freelancing in Germany this year, I freelanced in Canada for 2.5 years as a student.
In both countries I operate(d) a sole proprietorship, which means I was working out of my own name.
Tax numbers and other numbers
Canada: Since I was running a sole proprietorship, I didn’t have to do anything special. I could just invoice my client with my SIN (social insurance number). Easy!
Germany: Even though I already had a tax number equivalent to a SIN, I had to apply for the Umsatzsteuernummer as a freelancer. After completing a really long stressful form that took over an hour to fill out, I filed it and waited several weeks to get my number processed by the Finanzamt. During this time, I couldn’t legally work as a freelancer so lost out on the Christmas/year-end rush of jobs. (Edit: apparently I could legally work during this period, although it depends on if your client is willing to proceed. My client *needed* my UmStNr before they would issue me any work).
I now have THREE German tax numbers. I even gave the wrong tax number to my client because I was so confused with which one to use. I also have a TON of other numbers that I don’t know what to do with, asides from having to use it on some form once in a while (which also requires me to frantically dig out the number(s), cuz I didn’t even know they existed). It’s like surprise, you need this number too!!!
Filing tax returns
Canada: As a sole proprietor, I only had to file the yearly personal tax return. Since I hadn’t paid any taxes during the year, I would have to save enough to pay any taxes at year-end. This is different for freelancers earning above a certain amount – or maybe it’s a choice – but those higher earning freelancers file quarterly. Since I earned approximately $12K per year as a freelancer, I only filed once per year and mostly didn’t have to pay taxes on freelancing income after all my tax credits were applied.
Germany: Normally, freelancers file every quarter* to pay Mehrwertsteuer (19% VAT). However, because I’m a *new* freelancer, I have to file every MONTH for the next 2 years! Thanks a lot. I’ve already filed March and April returns, because that’s when I started getting paid. But the Finanzamt just wrote me to say they also want my January and Februrary returns.
*Mr W. corrected me in the comments below, and pointed out that Kleinunternehmer (freelancers earning less than 17.5K don’t have to deal with VAT). In that case it could be more similar to my Canadian freelancing example above.
Canada: I don’t know of any! (this does not mean there aren’t any!)
Germany: I can only earn 80% of my income from one client. I also need to file a tax return every month for the first 2 years if I earn more than 17.5K per year. If I do work that is different from what I studied in university, I may be have to switch from freelancer, to Gewerbe (more tax).
It was much easier for me to run a sole proprietorship in Canada than it is in Germany.
I find the rules in Germany really overwhelming and hindering growth as a new freelancer.
But I’m so grateful that the Finanzamt is so tedious, because if it was easy here I would have no reason to research my no-tax nomad strategy, and would probably stay in Germany for financial reasons. Now I have financial and administrative incentive to leave, which is more in-line with my life goals!