False self-employment – What you need to know as a solo self-employed professional

1. What is false self-employment?

False self-employment occurs when you are formally registered as self-employed but work under conditions similar to those of an employee. This means you issue invoices but are integrated into your client’s workflows, work under their instructions, and are financially dependent on them.

2. How do you know if you're truly self-employed?

The distinction between genuine self-employment and false self-employment is based on several criteria. What matters is not just your contract but how your work is carried out in practice.

Features of Genuine Self-Employment	Features of False Self-Employment
You can freely organize your work (hours, location, method of service). You take entrepreneurial risks (e.g., liability, investment in equipment). You have multiple clients and are not financially dependent on one. You’re paid per project, not a fixed salary. You run a website, advertise your services, and present yourself as a business.	You are integrated into your client’s organizational structure. You are subject to instructions (e.g., fixed hours, specific tasks). You work long-term for only one client with no others. You receive a regular monthly fee similar to a salary. The client provides your work equipment. You lack your own branding or marketing.

3. Possible consequences of false self-employment

If your work is classified as false self-employment, it can have serious consequences - especially for your client.

Labor law consequences:
You could be reclassified as an employee, potentially gaining rights like protection against dismissal, paid vacation, and continued payment during illness.
Social security consequences:
Your client must pay social security contributions retroactively - for the current year and up to four years back. They can only recover a small portion from you: your share of the contributions for the last three months.
Tax consequences:
If you charged VAT, your invoices may need to be canceled and VAT returns corrected - for both you and your client.
You’ll also switch from submitting a profit/loss statement (EÜR) to submitting the employee tax form (Anlage N).
Practical consequences:
The client relationship will likely end quickly, and you’ll need to find new sources of income.

4. Special case: Clients based abroad

If your client is located abroad, the same social security rules apply. However, you are responsible for registering and paying social security contributions yourself. This can be financially risky, as you must initially pay both employer and employee portions and then try to reclaim the employer share—which foreign clients often refuse to cover.

5. Another special case: Self-employed with only one client

Are you technically self-employed but have only one long-term client? Then you should definitely read this article.

Do you need support?

For our clients:
Feel free to reach out to us anytime at kontakt-team@smarta-steuern.de or book a consultation here – we're here for you!

Not a smarta client yet? No problem!
Book an appointment here for our comprehensive startup package or a consultation if you only have questions about specific topics.

Further questions?
Contact us via the app or by email at kontakt-team@smarta-steuern.de if you want to learn more about our consulting services or have other tax-related concerns.

What documents are required for preparing the EÜR and tax return with smarta?

Compulsory pension insurance for self-employed persons under § 2 SGB VI

Mandatory Pension Insurance for the Self-Employed with Only One Client