What is the trade tax (Gewerbesteuer)?

If you run a business in Germany, you will need to pay a trade tax (Gewerbesteuer). This tax is the most important source of revenue for your city, and it pays for many public services^{1, 2}.

This guide explains everything you need to know about this tax: how much it costs, who has to pay it, and how to pay it.

How much is the Gewerbesteuer?

The trade tax is a tax on profit (Gewinn), not revenue (Umsatz). The trade tax is 3.5% of your profits, multiplied by the local tax factor (Hebesatz)¹. The Hebesatz is different in every city. In Berlin, the Hebesatz is 410%¹, so the trade tax is 14.35% of your profit¹.

Trade tax: 3.5% (base tax) × 410% (Hebesatz) = 14.35%

If you run a sole proprietorship or a partnership, you don't really pay that much. When you pay the trade tax, you get a tax credit on your income tax¹. Most of what you pay in trade tax, you save in income tax. The tax credit is 13.3% of your profit¹.

Extra tax: 14.35% (trade tax in Berlin) — 13.3% (income tax credit) = 1.05%

In other words, in Berlin, you only pay 1.05% more with the trade tax than without.

Tax-free amount

For most businesses, the first 24500€ in profit are not taxed. For example, if you make 100,000€ in profit, you will only pay trade tax on 75,500€¹. This tax-free amount is called the Freibetrag.

Taxable amount: 100,000€ (profit) — 24500€ (tax-free amount) = 75,500€

For a society (Verein), the first 5,000€ in profit are not taxed¹. For a corporation (Kapitalgesellschaft, AG, GmbH), the entire profit is taxed^{1, 2}.

Full example

If you are a sole proprietor in Berlin, and you earn a profit of 50,000€ per year, you would pay 3,659€ in trade tax¹.

Your profit: 50,000€
Your taxable amount: 50,000€ — 24500€ (tax-free amount) = 25,500€
The trade tax rate in Berlin: 3.5% × 410% = 14.35%
Your trade tax: 14.35% × 25,500€ = 3,659.25€

You will get most of the trade tax back as a tax credit on your income tax:

Your taxable amount: 50,000€ — 24500€ = 25,500€
The tax credit rate: 3.5% × 380% = 13.3%
Your tax credit: 13.3% × 25,500€ = 3,391.50€
The difference: 3,659.25€ — 3,391.50€ = 267.75€

After the income tax credit, you pay 267.75€ more with the trade tax than without it.

Trade tax calculators

Trade tax calculator — Smart-Rechner.de (in German)
Trade tax calculator — Gewerbeanmeldung.de (in German)
Hebesatz by city — Lexoffice (in German)

Who must pay the Gewerbesteuer?

Sole proprietorships, partnerships and corporations must pay trade tax. If you are a Kleinunternehmer, you must also pay trade tax, but only if your profit is over 24500€ per year.

These businesses do not pay trade tax:

Freelancers (Freiberufler)
This is only if you are a Freiberufler according to the Finanzamt. For more information, see this guide. If you have multiple businesses, including at least one Gewerbe, you must pay trade tax on your entire income. For example, I was a freelance developer, and my website is a Gewerbe. I still had to pay trade tax on my freelance developer income.
Agriculture and forestry businesses
Businesses who earn less than 24500€ in profit per year
You must register for the trade tax, but you will pay 0€ in trade tax¹.

When do I pay the Gewerbesteuer?

First, you must register for the trade tax at the Gewerbeamt, and get a trade licence (Gewerbeschein). In Berlin, it costs 15€ to 31€¹.

In Berlin, the Finanzamt collects the trade tax once a year¹. If you gave the Finanzamt a SEPA debit authorisation, they will take the money directly from your bank account.

The Finanzamt can request advance payments (Vorauszahlungen) every quarter^{1, 2}: on February 15, May 15, August 15 and November 15.

Need help?

If you are starting a business in Germany, you should hire a tax advisor (Steuerberater). They will help you register your business, file your taxes, and help you with other business problems.

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