Germany lags rivals in innovation rankings

Germany lags its rivals when it comes to innovation, according to global rankings. But in other measures it leads Europe in technological progress. How innovative is the country really?

Germany lags rivals in innovation rankings
A solar energy control panel. Photo: DPA

The 2014 Global Innovation Index (GII) from the UN World Intellectual Property Organization (WIPO) placed Germany 13th out of 143 countries in rankings released last week.

It measured innovation by tallying innovation in seven areas, including in institutions, human capital and research and infrastructure.

At 13th, Germany scored well below Switzerland (1st), the United Kingdom (2nd) and Sweden (3rd). It ranked just ninth in Europe. 

Categories in which Germany ranked low in will not surprise those who live and work here. They included ease of starting a business (76th place), and ease of paying taxes (54th).

Innovation Germany

But the situation may not be as dire as it seems. Germany was up two places on its 2013 rank and some industry professionals, like David Knight, editor of Silicon Allee, a website for Berlin's startup scene, took issue with the country's low ranking.

"Germany is an extremely innovative country, and has been for some time," he told The Local. "The latest wave of this has been tech startups, focused on Berlin, which are starting to make waves outside Europe.

"While you could argue that Germans don't historically have the same sense of entrepreneurship, the willingness to take risks that their Anglo-Saxon cousins have, that is changing and can be seen by the growth in companies, employees and investment in the startup scene."

While the index did not focus specifically on Berlin's rapidly expanding startup scene, it did give the country top marks in broader categories.

The index ranked Germany third in quality of innovation which was measured by university performance, the reach of scholarly articles, and the international dimension of patent applications.

Patents also remain a silver lining. A study put out by the European Patent Office (EPO) in March found that Germany filed more patents than any other European country in 2013.

Companies such as Siemens, Bosch, BASF and Bayer led the field for the most applications.

NRW like Switzerland

Germany also ranked 7th highest for expenditure on research and development (R&D), ahead of the USA and France, which ranked 11th and 14th, respectively.

Marc Lehnfeld, R&D expert at Germany Trade & Invest said. “The Global Innovation Index underlines Germany’s particular strengths in R&D intensity, the high-level of cluster development and the strong base of high-tech manufacturing.

“Germany is the fourth-largest location in terms of R&D expenditure globally. The R&D expenditures of individual federal states are comparable with those of European countries.

“North Rhine-Westphalia spends as much as Switzerland on innovation.”

But in order to take advantage of R&D and other innovative activities being carried out in a country, "the most important condition is the presence of a large, well-educated stock of human capital", the study mentioned − in other words, a lot of university graduates.

Fortunately, Germany has plenty of students and strong universities.

The index also cited Germany as a top country for students studying abroad. While trailing behind the USA, Germany, along with France and the UK, was a preferred destination for university students hit with Wanderlust.

As the Education Ministry and German Academic Exchange Service announced last week, a record number of foreign students are currently enrolled at German universities − over 300,000 − and many of them choose to stay and work after graduation.

The top 15 innovative countries in the world in GII rankings                                                                            

1. Switzerland

2. United Kingdom

3. Sweden

4. Finland

5. Netherlands

6. United States of America

7. Singapore

8. Denmark

9. Luxembourg

10. Hong Kong 

11. Ireland

12. Canada

13. Germany

14. Norway

15. Israel

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7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network.