Self-employed IT Consultant as Professional Service Provider

An IT consultant was arguing with his tax office if his services were considered to be professional or as a tradesman. As both sources are subject to income tax, you will be surely asking yourself: “Why all this commotion?” The explanation is simple: avoidance of further taxation.

Tradesmen are also subject to trade tax (Gewerbesteuer) – next to income tax (Einkommenssteuer). Often you will read in this circumstance two sections of the law: §18 EStG defines income from trade and §19 EStG income from a free profession. What is the difference? The difference can be generally described as the difference between blue-collar and white-collar professions.

The FG Hamburg decided on April 27, 2006 (re 6 K 120/02), that a self-employed IT-consultant without a college or university diploma but developing complex application software is working comparable to a civil engineer and, therefore, offering a professional service insofar as he has the basic knowledge comparable to a civil engineer.

 

 


Published on the old CMS: 2006/12/21
Read on the old CMS till November 2008: 86 reads