Do I have to pay trade tax if my company is incurring losses?
December 6, 2022 | 40,00 EUR | answered by Simon Schaaf
Dear tax advisor,
I have been running a small IT services company for several years. Unfortunately, in recent years I have suffered losses due to significant changes in the market and increasing competition. Now I am concerned whether I have to pay trade tax despite the losses.
My current situation is as follows: Over the past three years, my company has accumulated losses of over 50,000 euros. I have tried to cut costs and explore new business opportunities, but so far the situation has not improved.
My worry is that trade tax will become an additional financial burden that my company cannot handle. Therefore, I am wondering whether I have to pay trade tax despite the losses and what impact this will have on my financial situation.
I would greatly appreciate it if you could suggest possible solutions to reduce or avoid the trade tax burden, if possible. I aim to continue running and making my company successful, so it is important for me to consider all tax aspects.
Thank you in advance for your support.
Sincerely,
Edith Tiefental
Dear Mrs. Tiefental,
Thank you for your inquiry regarding trade tax and your concerns about having to pay despite losses in recent years. It is understandable that you are thinking about how trade tax will affect your company and how you can possibly reduce or avoid the tax burden.
First of all, it is important to know that trade tax is calculated based on the business income of your company. This business income is the profit your company makes, minus certain tax additions and deductions. Since your company has been making losses in recent years, the business income is likely to be low or even negative. In this case, you would not have to pay trade tax.
However, there are some ways to reduce the trade tax burden, even if your company is making profits. For one, you can claim certain operating expenses to reduce the business income. These include depreciation on your business assets, rents and leases, personnel costs, or advertising expenses.
Furthermore, you have the option to offset losses from one year with profits from other years. This is called loss carryforward and can help reduce the tax burden. So if your company starts making profits again in the coming years, you can offset the losses from previous years with these profits and thus lower the trade tax burden.
You should also check if your company may benefit from the regulations for small and medium-sized enterprises (SMEs). SMEs can benefit from tax reliefs or exemptions under certain conditions, which can help reduce the financial burden of trade tax.
Finally, I recommend that you consult a tax advisor to discuss your individual situation and develop possible measures to reduce the trade tax burden. A professional tax advisor can help you identify and utilize tax optimization potentials.
I hope that this information has been helpful to you and wish you success for the future of your IT company.
Best regards,
Simon Schaaf
Tax Advisor
