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What requirements must be met in order to be exempt from trade tax?

Dear tax advisor,

my name is Hans Knorr and I run a small business in the IT industry. Over the past few years, my profits have been steadily increasing and I have had to pay higher and higher trade taxes. Now I am wondering if it is possible to be exempted from trade tax and what requirements need to be met for this.

Currently, I pay a significant amount of trade tax annually, which is putting a financial strain on my business. I am concerned that the increasing tax payments could significantly reduce my profits and potentially jeopardize the future of my company. Therefore, I am looking for ways to possibly be exempted from trade tax in order to improve my financial situation.

I have already done some research on this topic online, but I am still unclear about the regulations and requirements for trade tax exemption. That is why I am reaching out to you as an expert in this field to provide me with further information. What specific requirements need to be met in order to be exempted from trade tax, and what steps would I as a business owner need to take in order to obtain this exemption?

Thank you in advance for your help and advice.

Sincerely,
Hans Knorr

Simon Schaaf

Dear Mr. Knorr,

Thank you for your inquiry regarding the exemption from trade tax for your company in the IT industry. It is understandable that the increasing trade taxes pose a financial burden for your company and that you are looking for ways to improve your financial situation.

In principle, an exemption from trade tax according to § 3 GewStG is possible if your company qualifies as a small business within the meaning of § 11 (1) sentence 1 no. 2 of the Corporate Income Tax Act (KStG). This means that your company may have generated a trade income of no more than 245,000 euros and a profit of no more than 500,000 euros in the last two preceding years.

Furthermore, your company may not employ more than five employees and may not generate more than 500,000 euros in turnover per year. If these conditions are met, you may be exempt from trade tax under certain circumstances.

To apply for the exemption from trade tax, you must submit a corresponding application to the competent tax office and provide all necessary documents to prove your eligibility as a small business. This usually includes the annual financial statements, the profit and loss account, as well as a declaration regarding the number of employees and turnover.

It is important that you submit all necessary documents completely and correctly to maximize your chances of being exempted from trade tax. If your application is rejected, you have the opportunity to lodge an appeal against the decision within one month and, if necessary, provide further documents to support your claim for exemption.

I hope that this information has been helpful to you. If you have any further questions or need assistance with applying for the exemption from trade tax, please do not hesitate to contact me.

Best regards,
Simon Schaaf

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Simon Schaaf

Simon Schaaf

Heidelberg, Neckar

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