How does the trade tax affect my income?
May 24, 2024 | 50,00 EUR | answered by Simon Schaaf
Dear Sir or Madam,
My name is Martina Möller and I run a small business in the service sector. Over the past few years, I have been able to steadily increase my income and am therefore very pleased with the development of my business. However, I am concerned about how the trade tax will affect my income and whether I may have to pay additional taxes.
Currently, I have an annual turnover of 100,000 euros and a profit of 30,000 euros. I operate as a sole proprietor and already pay income tax on my profit. Now I am wondering if I have to pay trade tax on top of that and how high this tax burden could be. I am worried that the trade tax could impact my financial situation and would like to know if there are ways to reduce my tax burden.
Could you please explain to me how trade tax is calculated and how it affects my income? Are there any tax optimization options that I can take advantage of to reduce my tax burden? I would greatly appreciate your professional advice and support on this matter.
Thank you in advance.
Sincerely,
Martina Möller
Dear Ms. Möller,
Thank you for your inquiry regarding trade tax and its impact on your income as a sole proprietor in the service sector. I understand your concerns and will do my best to provide you with a detailed explanation and suggest possible optimization options.
Trade tax is a municipal tax levied on businesses based on their trade income, i.e. profit. The profit is adjusted for various corrections to determine the actual economic success of the company. The trade tax rate varies depending on the municipality and is usually between 200% and 500%.
In your case, with a profit of 30,000 euros and an annual turnover of 100,000 euros, trade tax would be calculated as follows: First, the trade income is determined, i.e. the profit minus the necessary adjustments. Let's assume your trade income is 25,000 euros. With a rate of 400%, you would pay trade tax of 10,000 euros.
It is important to note that trade tax is deductible as a business expense, reducing your taxable profit. So, if you are already paying income tax on your profit, the trade tax will increase your tax burden but also reduce your taxable income.
To optimize your tax burden, you could take various measures. For example, you could make investments that reduce your trade income or consider whether converting to a different legal form such as a GmbH would be beneficial. Individual advice from a tax advisor or auditor could help you develop the best possible tax strategy for your business.
I hope this information was helpful to you and I am happy to answer any further questions you may have. Thank you for your trust and I wish you continued success with your business.
Best regards,
Simon Schaaf
