Do I have to pay trade tax on rental income as well?
April 16, 2023 | 30,00 EUR | answered by Eva Heuser
Dear tax advisor,
I am Sebastian Bittner and I operate a small business in the form of a sole proprietorship. In addition to my primary business activities, I also rent out some spaces to third parties. In recent years, I have noticed that my rental income makes up a significant portion of my earnings. Now I have heard that there is also a trade tax to be paid on rental income. Is this true?
I am concerned that I may have to pay trade tax on my rental income and that this could have a significant financial impact on my business. I also wonder if I may have to pay taxes retrospectively, as I have not paid trade tax on my rental income in the past.
Could you please explain to me whether I actually have to pay trade tax on my rental income and approximately how high this tax could be? Are there any specific allowances or exemptions that could apply to me as a landlord? And how should I best proceed to fulfill my tax obligations correctly regarding my rental income?
Thank you in advance for your help and support.
Sincerely,
Sebastian Bittner
Dear Mr. Bittner,
Thank you for your question regarding trade tax on rental income as the landlord of a sole proprietorship. In fact, rental income is generally considered as commercial income and may therefore be subject to trade tax. However, there are certain exemptions and special rules that apply to landlords which may benefit you.
First of all, it is important to know that trade tax is levied on trade profits. Trade profits include not only actual business income but also income from renting out land and buildings. If the total trade profits of a business do not exceed a certain exemption amount, no trade tax is due. The exemption amount for sole proprietors is currently €24,500.
So, if your rental income falls below this exemption amount, you would not have to pay trade tax on that income. However, if your rental income exceeds this exemption amount, you would have to pay trade tax on the amount that exceeds it. The exact amount of tax depends on various factors, such as the tax multiplier of the respective municipality.
Regarding a possible retroactive payment of trade tax on rental income from the past, I can tell you that the tax office is generally entitled to review and demand taxes for up to four years retroactively. It is therefore advisable to review your tax documents from the past years and, if necessary, seek advice from a tax advisor to avoid any potential payments.
To correctly fulfill your tax obligations regarding your rental income, I recommend contacting a tax advisor who can provide you with individual advice. A tax advisor can help you accurately record your income and expenses, take advantage of possible tax benefits, and submit your tax returns properly.
I hope that this information has been helpful to you. If you have any further questions or would like individual advice, please feel free to contact me.
Best regards,
Eva Heuser
Tax Advisor
