Everything you need to know about pension income & self-employment

By Daniel Eberharter

Those who wish to continue working after retirement are sometimes faced with different employment options which differ from normal full-time employment. For people who are only accustomed to one form of employment under a collective agreement, these different forms can be a challenge.

What do all these expressions like low income threshold (Geringfügigkeitsgrenze) mean? How is the accounting done with invoices? What is considered an open trade (freies Gewerbe)? When does self-employment make sense? What are the requirements for registering a trade and what activities can be carried out without registration?

Here you’ll learn all about the different forms of employment apart from regular employment.

You’ll learn all about the ins and outs of working as a retiree and what happens when you work at a job that pays you above the low income threshold.

A small tip: What follows is general information. Please check what your personal requirements are with a tax advisor and with the information offices of the Chamber of Labour, WKO and SVA.

The guide to self-employment

  1. Things to consider regarding self-employment
  2. Different types of self-employment
    Newly self-employed
    Freelancer
    Tradesperson
    Low income work
  3. Open and regulated trades
    Open trades
    Regulated trades
  4. Additional links
The guide to self-employment


Things to consider regarding self-employment

If you want to do a job that pays beyond the low income threshold, it is important to check prior to taking on the job whether self-employment is an option.

What are the tax and insurance implications of being self-employed above the low income threshold? The resulting fees are best calculated in advance.

Tip: Anyone who earns below the low income threshold (EUR 446.81 per month in 2019) does not need to worry about additional tax implications. Billing can be done via invoices. Income in excess of this must be taxed and social security contributions need to be paid. (See Things you should keep in mind when using invoices).

Furthermore, it is necessary to check whether the work in question is open, or whether a certificate of qualification (also known as a trade license) is required.


Different types of self-employment

In this section, we explain the terms newly self-employed, freelancer, tradesperson, and low income employment.

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Newly self-employed

Newly self-employed people are those who earn taxable income from self-employment. Newly self-employed people are neither employees or freelancers. They are also not tradespeople.

Compulsory insurance

Newly self-employed people are required to be insured.

This includes:

  • pension insurance
  • health insurance
  • accident insurance
  • self-employment insurance

In practice, the following occupations are considered to be under the category of newly self-employed unless they are already compulsorily insured by employment (e.g. as an employee or as a freelancer):

Self-employed persons are lecturers, artists, experts, supervisory board member, journalists, writers, and persons who are self-employed in health professions (nurses, midwives, etc.), and freelancers if they use their own resources.

A contractor for work (Werkvertragsnehmer) is someone who is not active within the framework of an employment relationship but who has undertaken to do work. (See Things you should keep in mind when using invoices).

Social security for newly self-employed people

Important: Newly self-employed people are required to report their activity to the Social Security Service for Entrepreneurs (SVA) if their annual gross income exceeds EUR 5,361.72 for 2019.

Pay attention to deadlines!

You should register with the SVA within one month of doing work. SVA contributions are paid quarterly in advance. The amount of the required contribution is based on income estimates.

Invoicing

Services should be billed using a work contract or an invoice with a VAT number (if available).

Age exemption

People who have already reached the age of 55 by January, 1 1998 are exempt from the obligation to get pension insurance as a newly self-employed person since they already receive an old-age pension (Alterspension).

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Freelancer

In principle, any service provided can also be a freelance contract of employment. Please note: In the case of freelance service contracts, there is no entitlement to the collective wage agreement and unless specifically agreed otherwise, to special payments.

Freelancers who earn below the monthly low income threshold (geringfügig Beschäftigte) must be registered by the employer only for accident insurance. You can also voluntarily get health and pension insurance if you wish.

If the monthly salary exceeds the low income threshold, freelancers must be registered by the employer under all three main insurance policies (accident, health, and pension insurance) with the appropriate insurance institutions.

Tax liability for freelancers

Freelancers are subject to income tax but not wage tax as they are treated as self-employed.

Freelancers are responsible for paying their own income tax. (See Things you should keep in mind when using invoices).

If you have income subject to income tax (e.g. from a pension) in addition to income from freelancing, the limit for tax-free annual income is EUR 12,000.

Invoicing

Services should be billed using an invoice with a VAT number (if available).

Auf in die Selbstständigkeit
Artist practicing an open trade (freies Gewerbe)

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Tradesperson

Small tradespeople (also: small entrepreneurs) are people whose monthly income does not exceed EUR 446.81 (EUR 5,361.72 / year) or whose annual income from all entrepreneurial activities (including pensions) does not exceed € 30,000.

Apply first

You are only considered a small tradesperson if you apply for an exemption from the full insurance obligation. “This application must demonstrate that the income and turnover limits for small tradespeople are not exceeded. Due to the exemption from health insurance, you are not required to pay into pension schemes. Your only obligation is to pay for accident insurance.”

  • Source (in German): WKO

Conditions

This application can only be submitted by a person who has not been compulsorily insured under the GSVG for more than 12 calendar months within the last 60 calendar months (5 years) or who has reached the age of 60 or 57 and has not exceeded the above income limits for small tradesperson within the last five calendar years prior to submission of the application.

Invoicing

Billing is usually done via an invoice.

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Low income work

A person who does not earn more than the low income threshold per month (for one month or for an indefinite period of time) is considered to be doing low income work (Geringfügig Beschäftigte). In 2019, this is EUR 446.81 per month.

If you earn below the low income threshold, no social security contributions and no income tax are paid by the employer or the employee. However, “Geringfügig Beschäftigte” are automatically insured against accidents and can voluntarily take out health and pension insurance themselves. Unemployment insurance (voluntary or compulsory) is not possible.

Invoicing

Billing is usually done via an invoice.

123 go!
Just start working: Low income work has many advantages

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Open trades vs. regulated trades

Open trades

There are many open trades that can be carried out without a certificate of qualification (trade license).

Examples include chestnut roaster, film production, calligraphy, supervision of children without educational purposes (babysitting), and teaching workshops and seminars. The exercise of artistic activities is also exempt from trade regulations. Artists include painters, musicians, actors, singers, conductors, dancers and disc jockeys, as well as writers and journalists.

In principle, every service for which a customer wants to pay money is a trade and might not even exist yet! There is no limit to your entrepreneurial imagination. It is necessary to check whether the “new” trade falls under a regulated trade or not.

Invoicing

Billing is done via an invoice with a VAT number.

Regulated trades

The practice of a trade in a regulated profession must be accompanied by the relevant license or certificate.

Regulated trades are mostly activities that one learns within the framework of an apprenticeship or that represent a craft. Some examples are tourist guides, restaurants, masseuse/masseur, bakers, or watchmakers.

Invoicing

Billing is done via an invoice with a VAT number.

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All information is provided without a guarantee concerning its validity, correctness, or accuracy and is subject to change without notice.