Pandemic or not, the time has come for freelancers and the self-employed to be prioritized by the fintech industry. In Germany, freelancers spend an average of 25 days and €3000 ($3,510) a year attempting to organize their finances through disparate banking, accounting and tax advisory services.
Due to a lack of education, complex processes and subsequent delays, the self-employed are deprived of a clear, holistic view of their finances and are therefore, exposed to liquidity bottlenecks and the risk of being cash-strapped, especially problematic amid uncertainty as a result of Covid-19.
A one-stop shop solution is required. To resolve this issue, Berlin-based mobile business bank Kontist has recently launched a service that makes accounting an integral part of bank transactions so that corporate and income tax calculations can be made in real-time.
While accountants and tax agents are ready to help, it is important for the self-employed to account for and remain prepared when the time comes to calculate income tax payables. In most European countries, ordinary workers do not have to file income tax returns as it is paid directly by the employer from wages, making it even more so important for freelancers to use a service that is not confusing.
What must also be considered is the difference between revenue and income, which can get convoluted as there are several types of taxes, social contributions, fees and expenses which must be deducted before the freelancer actually knows what his net income is in Germany, according to Kontist.
As a result, the German challenger is attempting to simplify this process so that when an invoice is paid, the income tax and VAT a freelancer needs to set aside is calculated in real-time and the tax declaration is completed by human tax advisors