- Who Pays? Businesses with commercial income (excluding freelancers).
- Tax Rate: 3.5% base rate + variable municipal multiplier (250% — 580%).
- Tax Base: Profit adjusted for corporate tax (including add-backs for certain financing costs).
- Exemptions/Allowances:
- Freelancers (Freiberufler)
- Unprofitable businesses
- €24,500 for individuals, sole proprietorships, and partnerships
- €5,000 for associations
- No Allowance: Corporations (Kapitalgesellschaften)
Assessment rates (Hebesatz) of major municipalities
| Municipality | Assessment rate |
|---|---|
| Berlin | 410 |
| Hamburg | 470 |
| Munich | 490 |
| Cologne | 475 |
| Frankfurt am Main, Stadt | 460 |
The German trade tax / Gewerbesteuer is a local tax levied on businesses operating in Germany. Here’s a breakdown of how it’s calculated and key points businesses should know:
Trade Tax Calculation
- Tax Base: The tax base is determined by the business’s profit, calculated from the annual profit and loss statement.
- Base Tax Rate: A uniform base tax rate of 3.5% is applied to the tax base.
- Municipal Multiplier (Hebesatz): Each municipality sets its multiplier, which varies significantly across the country. This multiplier is applied to the base tax amount to determine the final trade tax due.
Example
Let’s say a business in Berlin has a profit of €100,000:
- Tax base: €100,000
- Base tax amount: €100,000 × 3.5% = €3,500
- Berlin’s Hebesatz (2023): 410%
- Trade tax due: €3,500 * 410% = €14,350
Key Points for Businesses
- Local Variation: The trade tax rate can vary significantly between municipalities due to the different multipliers. Businesses should consider this when choosing their location.
- Tax Deductibility: A portion of the trade tax paid can be deducted from the business’s income tax liability, reducing the overall tax burden.
- Exemptions and Allowances: Certain businesses, such as agricultural and forestry businesses, may be exempt from the trade tax. The trade-tax-free allowance for sole proprietorship and partnerships is €24,500 each year.
- Payment Schedule: Trade tax is typically paid in quarterly installments.
- Tax Advice: Due to the complexity of the trade tax calculation and the varying local regulations, businesses should seek professional tax advice.
Wikipedia: Municipal trade tax in Germany
Tax office Baden-Württemberg: How is trade tax calculated?
More about Additions Section 8 (German only) gesetze-im-internet.de
More about Deductions Section 9 (German only) gesetze-im-internet.de
Business tax: While this is a general term for taxes on businesses, it doesn’t specifically capture the local nature of the Gewerbesteuer.
Municipal trade tax: This is a more descriptive translation but might not be as widely understood as “trade tax.”
Ultimately, the most appropriate translation depends on the context in which you’re using it. However, “trade tax” is the most commonly accepted and understood term.
