In which cases am I exempt from trade tax as a freelancer?
February 6, 2023 | 30,00 EUR | answered by Eva Heuser
Dear Tax Advisor,
I am Karl Bergmann, a self-employed freelancer in the field of IT consulting. Over the past few years, I have successfully grown my business and have seen a steady increase in my income. Now, I am wondering to what extent freelancers like myself are exempt from trade tax.
I have always believed that freelancers are generally exempt from trade tax. However, I have heard that there are exceptions and certain activities or income thresholds that may trigger the obligation to pay trade tax. This concerns me as I am unsure of whether and to what extent I may have to pay trade tax.
Currently, I operate as a sole proprietor, generating the majority of my income from my independent consulting work. I have no employees and run my business on my own. My annual turnover is currently around 80,000 euros.
I would like to know from you in which cases freelancers like myself are exempt from trade tax and whether my current situation falls under this exemption. Are there specific criteria or requirements that need to be met to avoid the obligation to pay trade tax? What possible solutions are there to optimize my tax situation and potentially save costs?
I thank you in advance for your support and advice on this important matter.
Best regards,
Karl Bergmann
Dear Mr. Bergmann,
Thank you for your inquiry and your trust in my expertise as a tax advisor in the field of trade tax. I am pleased that you are considering your tax situation and are exploring the topic of trade tax.
Generally, freelancers like you, who primarily earn their income from self-employment, are exempt from trade tax. Professions such as doctors, lawyers, architects, engineers, artists, and IT consultants fall under the category of liberal professions. However, it is important to note that there are exceptions and special circumstances that may lead freelancers to still be subject to trade tax.
One of these exceptions concerns the so-called "catalog activity". This means that freelancers who perform certain activities listed in the Trade Tax Act are required to pay trade tax. These activities include, among others, activities in the field of bookkeeping, auditing, advertising, or business consulting. However, since you are working in the IT consulting sector, your activity does not fall under these catalog activities, and therefore you are exempt from trade tax.
Another point you mentioned is the income limit. Freelancers are only exempt from trade tax if their profit from self-employment does not exceed the limit of 24,500 euros per year. Since your annual turnover is 80,000 euros, you exceed this limit and would theoretically be subject to trade tax. However, in your case, it is not the turnover but the profit that plays a decisive role. Therefore, it is important that you determine your profit accurately and have it checked to see if it exceeds the income limit.
To optimize your tax situation and potentially save costs, I recommend that you carefully review and optimize your operating expenses. Through clever cost planning and optimization, you can reduce your profit and possibly fall below the income limit for trade tax exemption.
I am available for a detailed consultation and will support you in analyzing and optimizing your tax situation. Please do not hesitate to contact me to schedule a personal consultation appointment.
I hope that this information has been helpful to you, and I am available for any further questions you may have.
Best regards,
Eva Heuser
