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Mixed activities

Freelance and commercial activities are not mutually exclusive. You also have the option to work both as a freelancer and also to run a business commercially.

To classify your type of income with regards to taxes, the Tax Office decides between separable and inseparable mixed activities in the case of a sole trader.

Separable mixed activities

Do you carry out both self employed and commercial activities as a single freelancer? This is however only the case if there is no connection between the two areas (so-called mixed separable activity).

To separate the freelance part from the commercial one, we recommend the following:

  • Separate accounting systems
  • Separate bank accounts
  • Separate rooms for the businesses or at least separation of the inventory

Note: Operating costs, on the other hand, can be divided up by approximation.

Example: Eye specialist A sells contact lenses alongside care products

Inseparable mixed activities

There are inseparable mixed activities, if the revenues from different sources of income cannot be separated and the individual activities are mutually dependent as there is a business and economic connection between them. If the activities are linked with each other in this way, then in the case of a sole trader, the overall picture of his/her activity decides whether it is classified as freelance or commercial. The overall picture does not result from the share of the activity in the turnover or profit, but from the activity which characterises the overall activity.

A commercial activity is assumed if

  • the business presents itself to the ouside as a unit and the freelance activity is a by-product of the commercial activity or
  • a common result or a common service is rendered and also freelance elements are contained in the commercial activity.

Example: Tax consultant B prepares the balance sheet and draws up the tax return for his/her client and alongside this also does the bookkeeping. Taken on its own, the bookkeeping is a commercial activity. As the activities are mutually dependent, the entire activity has to be assigned to the freelance activity as the bookkeeping however has a lesser significance within the scope of the tax service contract.

Special features for partnerships

Should you have formed a partnership (for example OHG, KG, GbR) with other entrepreneurs, the so-called "income requalification" theory applies. In accordance with this, the activities of the partnership are considered as commercial in full, should you carry out commercial services alongside self employment. A reclassification of self employed income into commercial income only takes place if the commercial activity of the partnership is of minor significance.

In the case under dispute, a group practice for physiotherapists generated revenues from (freelance) physiotherapy activities and from the sale of neck pillows and ointments. The revenues from the sales activities amount in net terms to up to 3 percent of the total sales achieved and a maximum of 24,500 euros. This minimal commercial activity has no effect on the self employment.

Should you exceed one of these limits (3% of the total revenues or 24,500 euros), the tax office will consider the overall activities of the joint practice as being of a commercial nature.

Release note

The German original version of this text was drafted in close cooperation with the relevant departments. The Finanzministerium, represented by the Oberfinanzdirektion Karlsruhe, released it on 21.09.2018. Only the German text is legally binding. The Federal State does not assume any liability for the translated texts.

In cases of doubt or if you have any questions or problems, please contact the relevant authorities directly.