Do I, as a small business owner, have to pay corporation tax?
June 17, 2022 | 50,00 EUR | answered by Benjamin Hohenadel
Dear tax consultant,
I am Norbert Engel and have been running a small business as a sole proprietor for some time now. In the past, I have only dealt with VAT and have not paid any corporate tax. Now I have heard from some acquaintances that under certain circumstances, sole proprietors may have to pay corporate tax. This has made me unsure and I am wondering if I, as a sole proprietor, also have to pay corporate tax.
Currently, I am making an annual profit of less than 50,000 euros and have not yet submitted a corporate tax return. I am unsure if I am already above the threshold or if there are other factors that could lead to me having to pay corporate tax. My concern is that I may have to pay taxes that I have not taken into account.
Can you please explain to me if and when a sole proprietor has to pay corporate tax? Are there specific criteria that I need to consider in order to act in a tax-compliant manner? If I do indeed have to pay corporate tax, what steps do I need to take and how can I prepare for it?
Thank you in advance for your support and I look forward to your response.
Sincerely,
Norbert Engel
Dear Mr. Engel,
Thank you for your inquiry regarding corporate tax as a small business owner. It is understandable that you are thinking about this topic and would like to find out if you as a small business owner need to pay corporate tax.
In general, small business owners in Germany are usually exempt from corporate tax. Small businesses are defined as companies that generate a profit of less than 50,000 euros per year. Since you have stated that your annual profit is below this amount, you would generally not have to pay corporate tax.
However, there are certain exceptions and special regulations that may require even small business owners to pay corporate tax. An example of this is if the company earns certain income that is not considered business income, such as income from renting and leasing. In such a case, the obligation to pay corporate tax could still exist despite the low profit.
It is important that you keep a close eye on your income and expenses and, if necessary, consult a tax advisor to ensure that you are acting in accordance with tax regulations. If you are unsure whether you need to pay corporate tax, I recommend submitting a corporate tax return and disclosing all relevant information. This way, you can ensure that you do not have to pay back taxes and are on the safe side.
If it turns out that you do indeed need to pay corporate tax, you should contact a tax advisor to discuss the next steps. A tax advisor can help you gather the necessary documents and properly fill out the corporate tax return.
I hope that I was able to help you with this information. If you have any further questions or need assistance, I am happy to help.
Sincerely,
Benjamin Hohenadel
