What allowances apply to trade tax?
October 10, 2023 | 40,00 EUR | answered by Eva Heuser
Dear Sir or Madam,
My name is Irmgard Weise and I am the owner of a small craft business. In recent years, I have successfully built up my company and now achieve a solid profit. I am now faced with the challenge of dealing with the topic of trade tax.
I have heard that there are tax-free allowances for trade tax that can benefit me as a business owner. However, I am unsure of the specific tax-free allowances that apply and how I can claim them. I want to avoid having to pay unnecessarily high taxes and run my business economically efficiently.
My concerns are that I may not have all the relevant information and therefore miss out on tax benefits. It is important to me to optimally manage my business and financially position it as best as possible. Therefore, I request your support in gaining clarity on the applicable tax-free allowances for trade tax.
Could you please explain in detail which tax-free allowances apply to trade tax and under what conditions I can claim them? Are there any specific regulations that I as a craft business must consider? What possible solutions do you see to optimize my tax burden and benefit from the tax-free allowances?
I thank you in advance for your expert advice and look forward to your response.
Yours sincerely,
Irmgard Weise
Dear Ms. Weise,
Thank you for your inquiry regarding the tax allowances for your craft business. I am glad to see that you are actively looking into this matter to optimize your tax burden and run your business economically efficiently.
Basically, there is a tax allowance of 24,500 euros per year for trade tax. This allowance applies to natural persons earning income from a trade business, as well as partnerships. For capital companies (e.g. GmbH), there is no tax allowance as they are fully liable to trade tax.
In order to claim the tax allowance, certain conditions must be met. This includes that your business is classified as a trade business according to the Trade Tax Act. Also, your profit must not exceed the threshold of 245,000 euros, as the allowance is gradually reduced beyond this amount and completely eliminated for profits over 325,000 euros.
As a craft business, you should also consider that there are special regulations that may be relevant to you. For example, there is the option to deduct certain investments for tax purposes or to make use of the craftsman regulation to receive an additional tax allowance.
To optimize your tax burden and benefit from the tax allowances, I recommend creating a detailed list of your income and expenses and identifying potential tax savings. It may also be beneficial to work with a tax advisor to develop tax strategies tailored specifically to your craft business.
I hope this information has been helpful to you and I am available for any further questions you may have.
Best regards,
Eva Heuser
