As more freelancers choose to live abroad, Germany has become a popular hub for remote professionals earning in foreign currencies, especially USD. Whether you’re a content creator, software developer, designer, or consultant, if you’re living in Germany while earning income from U.S.-based clients or platforms, taxes can get confusing fast. Double taxation is a common concern, but there are practical steps you can take to stay compliant and avoid paying more than you need to.
What Is Double Taxation and Why Should You Care?
Double taxation happens when two countries claim the right to tax the same income. For example, if you live in Germany and earn money from U.S. clients, both countries may want a slice of that income. Without proper documentation and declarations, you could end up paying taxes twice on the same earnings.
In Germany, residents are taxed on their worldwide income. So even if all your clients are in the U.S., you still have to report and pay German income tax. At the same time, U.S. entities might withhold a portion of your income unless you actively take steps to reduce or eliminate that withholding.
Germany and the US Have a Tax Treaty
Luckily, Germany and the United States have a tax treaty in place to prevent double taxation. This treaty outlines which country has taxing rights over different types of income. Most importantly for freelancers, the treaty allows you to avoid being taxed twice—as long as you file the right forms.
For most freelancers, the form you’ll need is the W-8BEN. This is a declaration to U.S. entities that you’re a non-resident and thus eligible for reduced withholding rates—or no withholding at all—on certain types of income. If you don’t submit this form, platforms like Upwork, Fiverr, or YouTube may automatically withhold up to 30% of your earnings.
You also need to file taxes in Germany, which brings us to how the two systems interact.
Understanding Your German Tax Obligations as a Freelancer
In Germany, freelancers are required to:
Register with the tax office as a freelancer (“Freiberufler”)
File annual income tax returns (“Einkommensteuer”)
Pay VAT (Umsatzsteuer) if applicable
Submit quarterly income tax prepayments (“Vorauszahlungen”)
Your U.S.-sourced income will be considered part of your total taxable income in Germany. The good news is that if U.S. taxes were already withheld, you can usually claim a credit for that amount. But if no U.S. tax was taken (because you submitted a W-8BEN), you’ll just pay German tax instead—no double tax involved.
Strategies to Avoid Double Taxation Effectively
Here are steps to protect your income and stay on the right side of the law:
Submit a W-8BEN form to all U.S. platforms and clients
Keep detailed records of all income and any withholding
Hire a German tax advisor who understands international freelance work
Declare all foreign income in your annual German tax return
Track payment platforms like PayPal or Wise, as they may generate reports used by German tax authorities
Some freelancers even create a separate bank account solely for business income to make tracking easier.
Can You Set Up a Company to Optimize Taxes?
In some cases, setting up a legal entity in Germany—like a sole proprietorship or GmbH—may offer advantages. However, doing this just for tax reasons isn’t always beneficial. The complexity and additional accounting costs often outweigh the savings unless your income is substantial.
That said, if you’re working long-term with high earnings, a tax advisor may recommend forming a company and registering for VAT to claim input tax deductions.
Don’t Forget Health Insurance and Pension Contributions
In Germany, taxes aren’t just about income. Freelancers are also expected to contribute to public or private health insurance. Depending on your status and income level, you may also be required to contribute to the pension system or secure alternative private retirement savings.
These contributions are mandatory and can be substantial, so include them in your budgeting as part of your overall tax planning.
Tools and Platforms to Simplify Tax Management
To stay organized and make tax season less stressful, consider using:
Accountable: A tax and invoicing app tailored for German freelancers
Lexoffice or Debitoor: German-language tools that help with VAT filings and expense tracking
Wise: For receiving international payments with lower fees
GetSorted.de: A platform that helps expats file German taxes in English
You can also explore Freelance Tax Tools for Expats in Germany for more options and reviews.
Filing on Time and Staying Compliant
Tax deadlines in Germany are strict. If you’re filing without a tax advisor, the due date for your annual return is typically July 31 of the following year. If you’re using a tax advisor, that can be extended to the end of February of the year after that.
Missing deadlines can result in penalties and interest, so be proactive. Set calendar reminders and maintain a monthly bookkeeping routine.
Freelancing Abroad Doesn’t Mean You Can Ignore Taxes
Earning in USD while living in Germany might feel like a gray zone, but it’s fully manageable with the right steps. By submitting the correct U.S. forms, understanding your local obligations, and staying organized, you can reduce your tax burden and avoid costly surprises.
For more guidance, you might want to visit resources like this expat tax planning guide or consult a tax advisor who works with U.S. and German systems.
Being a global freelancer is empowering—just make sure your tax game is just as strong as your portfolio.