Do I have to pay trade tax if I am only self-employed part-time?
August 27, 2023 | 50,00 EUR | answered by Isabel Möller
Dear tax advisor,
My name is Lucas Gerdes and I am currently employed in a full-time job. Additionally, I run a small business on the side, which has so far only generated minimal profits. I have heard that even part-time self-employed individuals have to pay trade tax. I am worried that this could lead to financial difficulties for me and I am wondering if I have to pay trade tax at all, considering my low income.
Last year, I made a profit of less than 5,000 euros and I do not expect any significant increases in my income in the future. Is it possible that I still have to pay trade tax? And if so, what would be the tax burden in my case? Are there any ways to reduce or even avoid the trade tax burden, since my business is only run on the side?
I would greatly appreciate a detailed explanation on this topic, so that I can better orient myself and avoid any unpleasant surprises in my tax return. Thank you in advance for your help.
Sincerely,
Lucas Gerdes
Dear Mr. Gerdes,
Thank you for your question regarding the trade tax as a part-time self-employed person. It is understandable that you are concerned about whether you could face financial difficulties due to your low profits. I will now explain to you in detail whether you have to pay trade tax as a part-time self-employed person and how high the tax burden could be in your case.
In principle, part-time self-employed persons also have to pay trade tax if they make a profit with their business. Trade tax is a municipal tax levied on business owners on their profits. It does not matter whether self-employment is carried out full-time or part-time. However, there is a tax-free allowance of 24,500 euros, up to which no trade tax has to be paid. Since your profit was below 5,000 euros last year, you would therefore fall below this tax-free allowance and would not have to pay trade tax.
If your profits increase in the future and exceed the tax-free allowance of 24,500 euros, you would have to pay trade tax. The amount of trade tax depends on the trade income and the multiplier of the respective municipality. The multiplier can vary depending on the municipality and is usually between 200 and 600 percent. To calculate the specific tax burden, the trade income would have to be multiplied by the multiplier.
However, there are ways to reduce or avoid the trade tax burden, even if your business is only operated part-time. One possibility would be, for example, to reinvest profits sensibly and thus reduce the trade income. In addition, certain expenses can also be claimed as tax-deductible to reduce the profit. It is therefore advisable to seek advice from a tax advisor in order to fully utilize possible tax benefits.
I hope this detailed explanation has helped you with your orientation. If you have any further questions, I am at your disposal. Thank you for your interest and inquiry.
Sincerely,
Isabel Möller
