A significant portion of the population belongs to the group of so-called self-employed individuals and practices a so-called liberal profession. How is the “liberal profession” defined, what constitutes the essence of a liberal profession, and which professional groups can consider themselves members of the liberal professions?
I. Definition
In the search for a definition of the “liberal profession,” one must note that the term “liberal profession” has been part of professional terminology since the Middle Ages (“artes liberales”), but a generally accepted definition has yet to be established.
Although the term “liberal profession” can be found in many laws, such as § 18 para. 1 no. 1 sentence 2 of the Income Tax Act (EStG), § 1 para. 2 of the Partnership Act (PartGG), there is no legal definition from the German or European legislator. Different approaches are also taken regarding the characteristics of a liberal profession. A significant point is the special relationship of trust between the member of a liberal profession and the person who uses their services.
The Federal Association of Liberal Professions defines members of the liberal professions as individuals who, based on special professional qualifications, provide intellectual and idealistic services independently, responsibly, and professionally in the interest of their clients and society.
II. Who Practices a Liberal Profession?
According to § 18 para. 1 no. 1 sentence 2 of the Income Tax Act (EStG):
“Liberal professions include independent scientific, artistic, literary, teaching, or educational activities, the independent professions of doctors, dentists, veterinarians, lawyers, notaries, patent attorneys, surveyors, engineers, architects, commercial chemists, auditors, tax consultants, consulting economists, certified public accountants, tax agents, alternative medicine practitioners, dentists, physiotherapists, journalists, photojournalists, interpreters, translators, pilots, and similar professions.”
The law thus distinguishes between so-called catalog professions and “similar professions.”
Some professionals face difficulties in being recognized as freelancers, especially those whose professions are not listed as catalog professions under § 18 para. 1 no. 1 sentence 2 EStG. There may be difficulties in delineating these professions, especially where distinguishing between commercial activity and freelancing is not clear-cut. Therefore, a freelancer must meet the requirements inherent in the nature of a liberal profession.
III. What Defines the Liberal Profession?
The following characteristics summarize the essence of the liberal profession:
1. Special Professional Qualification
Members of liberal professions provide high-level services that require substantial expertise, which must be demonstrated through appropriate qualifications.
Freelancers do not engage in a trade under German law. Therefore, freelance activities are not subject to trade tax under § 2 para. 1 of the Trade Tax Act (GewStG) in conjunction with § 18 of the Income Tax Act (EStG).
2. The Relationship of Trust
The freelancer maintains a special relationship of trust with their client (mandant, patient, etc.). This creates a particular duty of care and a confidentiality obligation toward third parties.
3. The Interest of the Public
Services rendered by members of liberal professions relate to essential needs of the citizens. As such, they are always in the interest of the general public.
4. Individual Service
These services are provided in the interest of the client. Liberal professions provide their highly personal services, tailored individually to the client (mandant, patient, etc.), and cannot be standardized.
5. Professional Independence and Personal Responsibility
Freelance work must be carried out with professional independence. This means freedom from instructions and independence from constraints, regardless of whether the freelancer is employed or self-employed. Therefore, the liberal profession entails a high degree of personal responsibility in its practice, combined with economic risks that the freelancer must assume, which may, in some cases, be partially insurable.
6. Ethical Orientation
Liberal professions deal with fundamental legal goods and, therefore, have a special ethical obligation.
7. Professional Law
To safeguard their independence and high level of performance, members of liberal professions need professional regulations and professional associations. Thus, there are professional regulations, for example, for doctors in the Federal Medical Code (Bundesärzteordnung), for tax consultants in the Tax Consultancy Act (Steuerberatungsgesetz), for auditors in the Auditors’ Act (Wirtschaftsprüferordnung), for lawyers in the Federal Lawyers’ Act (Bundesrechtsanwaltsordnung), and so on.
IV. Conclusion
The liberal profession is more liberal than other professions, yet some regulation is necessary to maintain the freelancer’s freedom.
Note
This text does not claim to be exhaustive and does not constitute legal advice. Legal advice is provided solely on a case-by-case basis after examining the specific facts from all legal perspectives.
If you need advice on these or other legal issues, please contact Mr. Eugen Balin, LL.M. at info@balin-legal.de.
