Most important points:

In Germany there is an obligation to pay taxes that applies to sexual service providers as well. You must obtain a tax number at the local government finance bureau and report all earnings using this number. The finance bureau will then let you know how much tax you owe. It is not necessary to register at the bureau of commerce as a sex worker.

Employed (salaried) or self-employed

Both forms of employment are possible for all types of sexual service providers in Germany. However, in practice there are seldom salaried employment relationships in sex work. Most sex workers are self-employed. The following requirements apply to self-emplyoed work:

Bookkeeping and recording of finances

All self-employed people in Germany must record their income as a form of written proof. Your work expenditures should be recorded as well; these can be claimed back before you pay taxes, meaning that you can subtract these from the taxable amount of income you earn. Each expenditure must be verified with a receipt.

The Duesseldorfer Process (Düsseldorfer System)

Information about this specific tax system for sex workers can be found here
Paying taxes as part of the Düsseldorfer System is a way of paying taxes in advance. Even if you choose to participate in this system, you must still submit a record of your income at the end of the year.

How and where can I register to pay taxes?

From the 1st of July onwards:

All persons who begin sex work from the 1st of July 2017 must register at a government bureau. The designated bureau varies from state to state. These will most likely only be confirmed starting this Autumn or later.

On the 1st of January all sex workers in Germany are supposed to have registered themselves. The government bureau in charge of processing registrations should automatically forward this to the local finance bureau. At the moment, most cities, counties or even states do not yet have the technical resources to forward data securely, so the transfer of registration data will not take place right away. Therefore, new sex workers will still need to register directly at the finance bureau.

More information regarding the registration requirement can be found here.

Must I register at the bureau of commerce as well?

Sex workers are not required to register at the bureau of commerce nor do they need a business permit. Due to the high level of social stigma, only one tax number may be acquired at the finance bureau. This is also the case if you decide to pay taxes under a different job title than „prostitute.“

Even after the new law has taken effect, you are not required to register with the bureau of commerce. We advise against registering with the bureau of commerce because your registration will be forwarded to other government bureaus. The finance bureaus, however, are bound by tax secrecy laws intended to prevent them from forwarding your details to other bureaus other than the tot he Chamber of Industry and Commerce.

Chamber of Industry and Commerce (IHK) – must I become a member?

All business owners are obligatory members of the IHK. As a self-employed sex worker, you are considered a (small) business owner, so your membership in the IHK is mandatory. In general, you do not need to register there directly. If for some reason you do, the IHK will notify you with a letter. Although the membership fees are very low, the IHK does nothing to benefit sex workers. The BesD is currently working on a proposal for ways that the IHK can do more for sex workers.

Which taxes do I need to pay?

Income tax

If you are earning less than the tax-free living income of 8,820€ per year, you are not required to pay income tax. This is the amount set in 2017 – see the following link for up-to-date numbers.

Otherwise, the initial tax rate is currently 17% of income. The tax rate is progressive, meaning that the more money you make the higher your rate of tax. If you earn 52,000€ per year, you pay 48% taxes.

You will be notified about how much tax you owe by the finance bureau, after you have reported your income. We advise getting a tax advisor to do this for you, unless you are very familiar with the tax system.

After your initial registration with the finance bureau, they’ll want to know how much profit is expected in the first year. We recommend reporting a sum below the tax-free living income (<8,800€, as of June 2017) level, otherwise you will be asked to pay taxes in advance.

Business tax

Contrary to sales tax, business tax is taken according to the amount of profit accumulated. This is generally less than the revenue. If you make 24,500€ or more, you will be required to pay business tax. Most solo self-employed sex workers do not earn at this level, though, and do not need to pay business tax. As soon as you begin earning at least 24,500€, the finance bureau will contact you.

Sales Tax

What is this?

Sales tax is the same as value-added tax (VAT) in Germany. The rate is currently at 19%. There is also a reduced rate of 7%, which applies to taxi rides, newspapers and books, overnight hospitality services, etc. The normal rate of 19% applies to sexual services. Every service that you provide automatically includes 19% sales tax, which is taken by the finance bureau. You may apply to pay pre-taxes instead, but we recommend consulting a tax advisor about this.

Does everyone have to pay sales tax?

No, only if you make more than 17,500€ per year.
*The revenue is not to be confused with the profit, in this case. Your revenue is the money you receive from your clients. After spending a portion of this on work-related necessities and giving part of this to your agency or manager (if you work in a venue), the amount left over is the profit, which is taxable. This is sometimes also referred to as the „profit before taxes.“

What is the small business rule?

Everyone who makes less than 17,500€ per year is considered a „small business operator.“ As soon as you make more than this amount you will be required to start paying sales tax in the following year.
In the first year of self-employment, the sales taxes are spread out across the whole year. In order not to pay taxes, you need to be making less than 1,458€ per month, even if you begin working in the middle of the year.
*In general, at the start of self-employment, you will not be required to pay taxes for the first two years if you do not make more than 17,500€ in the first year and no more than 50,000€ in the second year.

Three important „boundaries“ to keep in mind:
8,840€: tax-free minimum income level
17,500€: must pay sales tax
24,500@: must pay business tax

Here is a link to a bookkeping guide for self-employed and small business owners: Buchhaltung für Selbständige und Kleinunternehmer →