From what amount of profit do I have to pay trade tax?
October 22, 2022 | 40,00 EUR | answered by Isabel Möller
Dear Tax Advisor,
my name is Anna Weise and I run a small GmbH in the field of business consulting. In recent years, I have been able to steadily increase my profits and now I am facing the question of at what profit level I have to pay trade tax.
The current situation is that my profit in the last fiscal year was 60,000 euros and I expect an even higher profit for the current year. So far, I have not paid any trade tax because my profit was below the exemption limit.
My concern now is that with a further increase in profits, I may suddenly be confronted with trade tax payments that could greatly impact my financial situation. I am wondering at what profit level the trade tax liability kicks in and how I can prepare for it.
Are there ways to optimize my profit in a way that keeps me below the threshold for trade tax? Or are there tax planning options to minimize the burden of trade tax?
I would greatly appreciate your assessment and possible solution suggestions to better understand my tax situation and plan accordingly.
Thank you in advance for your help.
Best regards,
Anna Weise
Dear Mrs. Weise,
Thank you for your inquiry regarding the trade tax liability for your GmbH in the field of management consulting. It is understandable that you are concerned about the possible burden of trade taxes, especially since your profits have been steadily increasing in recent years.
Trade tax is a municipal tax that must be paid by tradespeople on their profits. The amount of trade tax is determined based on the business income, which is calculated by adding and subtracting certain items from the taxable profit. There is a tax-free allowance of 24,500 euros, up to which no trade tax needs to be paid.
For a business income of 24,501 euros up to 1,000,000 euros, the tax rate is 3.5%. For amounts over 1,000,000 euros, the tax rate increases to 3.5% plus 4% of the business income that exceeds 1,000,000 euros. It is important to determine whether your profit exceeds the tax-free allowance and at what point you would need to pay trade tax.
To optimize your profit and potentially stay below the threshold for trade tax, you could take various tax measures. This includes, for example, utilizing depreciation opportunities for investments in your company, the tax recognition of operating expenses, or setting up provisions. Forward-looking tax planning can also help minimize the tax burden.
It is advisable to seek advice from an experienced tax advisor to analyze your tax situation accurately and develop individual solution proposals. A good tax advisor can assist you in utilizing various options to optimize your profit and reduce the trade tax burden.
I recommend scheduling a meeting with a tax advisor promptly to discuss your tax situation and develop a strategy together to minimize trade tax.
I hope this information is helpful to you and I am available for any further questions.
Best regards,
Isabel Möller, Tax Advisor
