FAQ
The ten most frequently asked questions:
1. How do I become free lance?
It is enough for you to inform your tax office that you will be working in future as a self-employed designer (you don‘t need to fill in a special form to do this). The first time you submit a VAT declaration this also provides documentary proof that you have income from free-lance work. You will be given a registration number (a tax number) which will be yours for the rest of your life, and in future you will pay tax on your income according to § 18 of the German Income Tax Law (EStG).
2. Why don‘t I need to register myself as a commercial enterprise?
The profession of a designer (planning and designing) is classified under German law as a free-lance trade and not a commercial activity. This is basically because you are providing a service rather than dealing in goods (in which case you would have to pay commercial tax as well as income tax).
You only need to register as a commercial enterprise with the local town hall if you actually do run a commercial business, such as an advertising agency or a print shop. Receiving agent’s commission, e.g. for printing works, is considered a commercial activity, since one definition of being free lance is that you only receive income from activities you perform yourself, and not from those you cause others to perform.
3. Value Added Tax: when is it 7% and when is it 19%?
The German law on value added tax makes a clear distinction here: VAT is 7% on activities which fall under the jurisdiction of the copyright law and involve a licence for right of use, and 19% for everything else. This means that a typical design job involving draft of a design and all subsidiary activities is liable to 7% VAT, while setting up a structure which does not involve particularly creative work (pure “conveyor-belt layout work“) will entail VAT at the rate of 16%.
4. What kind of insurance do I need?
Since 1982 the law has made it clear that all independent designers, artists and journalists have to have health and pension insurance. This means that all free-lance designers are treated in the same way as employees and only have to pay half the insurance contributions.
For further information contact the
Künstlersozialkasse (KSK),
Gökerstraße 14,
D-26384 Wilhelmshaven,
Tel: +49. (0)4421. 754 39.
Costs arising from accidents at work are covered by obligatory accident insurance, and in the case of designers the relevant professional association is the
BG Druck and Papierverarbeitung,
Rheinstraße 6 - 8,
D-65185 Wiesbaden,
Tel: +49. (0)611. 131 0,
who will be happy to send you further information. You should certainly make sure that you don‘t end up falling completely outside the safety net of the social welfare system by being “unofficially self-employed“!
5. How much does a designer earn on average?
They can earn anything. There is no upper limit. However, your income should not be lower than that of a designer working for an employer, who earns between 2,500 and 4,000 euros per month. An average salary between these upper and lower limits would work out at approximately 43,875 euros per year. To end up with the same take-home income as a designer working for an employer you will also need to cover your operating expenses.
According to information from ver.di, the trade union which covers the media sector, operating costs usually amount to half the income, so in order to get a salary of 43,875 euros per year you would actually have to earn 67,300 euros. And this turnover should be achieved in 210 days of the year, to take into account holidays and days off sick, which means a turnover of around 320 euros per working day. You should therefore apply an hourly rate of about 76 euros in order to end up with the income of an average designer working as an employee.
6. How do I calculate the price to charge for a design job?
Starting with the hourly rate you have decided upon, you then decide how long the work is going to take you. The price you get in this way is what you should charge for the design itself. If the design is to be used, there is an additional charge for granting the client a license for use relating to your design (you grant either simple or exclusive copyright, based on the provisions in § 31 of the German Copyright Law). You can find the average time required for all design jobs (work contract) and the fee to be charged for the necessary granting of copyright (license agreement) in the AGD Collective Agreement on Fees for Design services, which you can obtain from the AGD Shop.
7. When is a design order a design order?
The important thing is that the person commissioning a design from you gives you a design order and refers to it as such! “Give it some thought“ is not a design order. So you need a written or oral statement that the person who wants a design from you is ordering that design and that a clearly specified sum will be paid for clearly specified work. If you accept this order, then you and the person commissioning the order have definitely entered into a contractual relationship.
It is a good idea to get the order confirmed in writing and to ensure that this “mini contract“ sets out once again the work you have decided will be done, the payment agreed upon (for the design itself and the copyright) and the deadline for presentation of the work. This written confirmation can be sent by fax and at the same time posted by letter, and it will then serve as evidence that an order has been placed and accepted.
8. Does a client have to pay for a design even if he doesn‘t like it?
Your design contains your concentrated creative potential. It is based on the client‘s briefing to you, and the design itself can be seen as an aid in the process of deciding whether or not it will be used in the form that you and your client have worked out together. It is therefore obvious that the client has to pay for the design whether he likes it in its present form or not.
If the client isn‘t sure whether he will like the design he has ordered, you can suggest presenting him with intermediate drafts of the design. Before starting work you should agree with the client when such drafts should be presented, what form they should take, and how much additional cost they will entail.
9. What kind of copyright agreement for which purpose?
A design job has two segments: the creation of the design itself (a work contract as defined in § 631 of the German Judicial Code) and the granting of copyright or license to use the design (a licence agreement according to § 31 of the German Copyright Law). You can grant "simple" or "exclusive" rights to use your design. "Simple" means for one event or purpose, while "exclusive" means that the client will have permanent and exclusive rights to the design. Both ways of granting a license to use a design can be further limited in terms of time, territory or precise content. Therefore the client will only need to pay for the “right package“ he wants. You will find more information and concrete examples in the AGD Collective Agreement on Fees for Design Services.
10. Do I have to provide the client with original digital data?
You don‘t have to, unless the whole purpose of the job was to create digital data. On the other hand, in this electronic era you can hardly refuse to hand over a design in digital form. So you can sell the data in digital form for an additional payment. And since you will then have no control over how the data is used, if the client so wishes he can have the data with the most expensive right-of-use license agreement, which grants him exclusive use. Some data is stored in forms which cannot be opened, so manipulation of your design is excluded from the very start. If the client can make changes to the design himself, you can request payment for the right to process or reshape the design (according to § 23 of the German Copyright Law). You should certainly not supply the client with the required fonts or typefaces. He must buy them himself (a list with delivery addresses and order numbers for typefaces from your designer colleagues is quite sufficient).
Who can answer Question 11 and the rest?
Over the last 30 years the AGD has helped more than 8,000 free-lance designers in Germany with all questions about the commercial, legal and tax aspects of their business activities. The AGD is the biggest professional association of independent designers in Europe. You can get further information direct from the
AGD Office at
Steinstrasse 3,
Braunschweig 38100,
phone: +49. 531. 167 57
Email: info(at)agd.de