Self employment and Coronavirus: crisis-survival tips
Updated: Aug 26, 2020
We live in a weird, challanging time.
Being self employed now means going from full-power work into a situation in which there is not so much work, if at all. However, our payments continue to be charged: health insurance, taxes down payments, office-rent.... Some of us even have employees to take care of.
It is clear that the longer the crisis goes, the more difficult for it will be. But there are some things we can do now in order to avoid losses and damages. Here are some of them.
The simplest way to assist yourself in difficult times is to manage your expenses: go over your bank account, and try to think if there are things you can give up on. This it true both for business and private expenses.
Of course, now is also not a time to make investments. For example, before the crisis I wanted to replace my coffee machine in my office (Nespresso to beans, out of environmental reasons). Of course, I did not get that coffee machine. It will wait to when the world return to normal.
So, manage your expenses, try to cut down on things you do not need, save your resources to the things that really matter.
Due to the crisis, Germany is providing us with the possibility of delaying our income and trade tax (Einkommen- und Gewerbesteuer) payments. In German, this is called Steuerstundung. Most likely, it will not possible to delay VAT payments, as those are booked based on "real" bookkeeping and therefore, "real" income/ profits.
Additionally, you can decrease your income and trade tax down payments (Einkommen- und Gewerbesteuervorauszahlungen). The tax authorities promised to be vary generous with approving both the decrease of the down payments and the payment deadline delays.
If you would like to apply, please consult your tax professional or your local tax office (Finanzamt). Also, it is important to remember that this is not a present you get from the tax office, but just a delay in the deadline for payment. You will have to pay your income and trade tax in their full amount. It is just a question of planning your funds during the crisis.
My advice is to give this issue some thought, since on the one hand, some of you will need liquid funds right now, but on the other hand - we do not want to finish this crisis in debts that we cannot pay later on. On this regard, I can give you two pieces of advice: the first one would be to not act out of panic, but to try to realistically and rationally analyze the situation and make your decisions accordingly. The second piece of advice is to postpone payments only in real emergencies, if there is no other choice.
As for the tax down payments (Vorauszahlungen), my advice would be to wait a month in order to understand your occupational and financial situation better, and then try to realistically estimate your yearly income (and workload, of course) in 2020 - and apply for a change of down payments accordingly. If you do choose to reduce your tax down payments, it will be a good idea to keep track of your income, in order to see if you are actually doing better than expected. In this case, you should both be happy - and put money aside for your income tax payment for 2020.
NEW 26.03.2020: The postponing of social contributions (meaning: voluntary public health insurance payments and social contributions for your employees) is now also made possible. Since this decision was only made yesterday, there are still no applications forms for it. Please contact your health insurance provider (Krankenkasse) in writing and apply for the postponing. Similarly to the postponing of tax payments, please note that this is not a present, but a deadline extension. You WILL have to pay your health insurance contributions eventually. Therefore, please use this option wisely.
The German government is planning to provide help to freelancers and self employed people during the COVID-19 crisis. The benefit given by the federal government is up to 9.000 Euro for 3 months for self employed people and small companies with up to 5 employees and up to 15.000 Euro for 3 months for small companies with up to 10 employees, and is meant to cover business costs during the crisis (such as: rental costs for an office, for example).
Due to the crisis situation that many of us experience, the government is planning to set up a simple application process and fast payments. It is however important to know, that many technical details are still unclear.
This benefit is the expression of the social state and solidarity. As our finance minister (Wirtschaftsminister) Mr. Altmaier said: "wir lassen niemand alleine" (we do not leave anybody alone). For more official information (with cute info-graphics and Coronavirus-icons), please see here.
Additionally, the different states (Bundesländer) are also granting their own assistance to freelaners and self employed people. The state of Berlin is offering a benefit of up to 5.000 Euro for self employed people, freelancers and small companies.
As per the information we have now, one can apply for both grants in parallel. However, the grant from the federal government is probably meant only for covering business costs, such as rental costs for an office/ studio and car leasing for a business car. The application for both grants is to be submitted digitally via Investitionsbank Berlin (IBB) starting Friday, 27.03.2020 at 12:00.
Please note that the details regarding this issue keep on changing, as our government is still working on it. I assume more details will be made clear tomorrow.
Our tip is to act wisely with those applications as well: inform yourselves about your options, try to think what is most beneficial for you, and most importantly: act in solidarity. Please only apply for the grants if you need it in order to survive through this challenging time.
I will of course continue keeping you updated about the situation and options.