When do I have to pay trade tax as a business owner?
September 2, 2022 | 30,00 EUR | answered by Eva Heuser
Dear tax advisor,
I am Andrea Kessler and operate a business as a freelance writer. In recent years, I have steadily generated income and this year, for the first time, I have made a profit that exceeds the tax-free allowance. Now I am wondering when I, as a business owner, must pay trade tax.
Currently, I am uncertain whether I need to pay trade tax now or if I can wait. I have heard that trade tax depends on the amount of profit and regional differences must be considered. The various tax-free allowances and tax rates also confuse me.
My biggest concern is that I may inadvertently pay trade tax too late or too early, resulting in possible tax repayments or fines. I would like to avoid any tax issues that could cause difficulties for my business.
Could you please explain to me when I, as a business owner, must pay trade tax and what deadlines I must adhere to? Are there ways to minimize or optimize the trade tax burden? I would be very grateful for your help and advice on this matter.
Thank you in advance.
Kind regards,
Andrea Kessler
Dear Ms. Kessler,
Thank you for your inquiry regarding trade tax as a freelance copywriter. I would be happy to explain the key points you should consider regarding trade tax.
Firstly, it is important to know that trade tax is a municipal tax levied on the profits of a commercial enterprise. As a freelance copywriter, you fall under the category of freelance activities and are generally not subject to trade tax. However, freelance activities may be considered as a commercial enterprise if you exceed a certain profit threshold.
Trade tax is only due if the profit exceeds the exemption limit of €24,500 (for natural persons). The profit is determined by the result of your commercial enterprise's earnings according to the provisions of the Income Tax Act, supplemented by certain additions and deductions. The amount of trade tax is then determined by the respective municipal multiplier in the municipality where your commercial enterprise is located.
There are ways to minimize or optimize the trade tax burden, such as utilizing exemptions, using investment deduction allowances, or choosing a lower multiplier by relocating the company to another municipality.
Regarding deadlines, please note that trade tax is due annually by February 15th. The assessment of trade tax is made by the competent tax office based on your profit determination. It is advisable to determine your profits in a timely manner and make advance payments if necessary to avoid additional payments.
I hope this information has been helpful. If you have any further questions or would like personalized advice, please feel free to contact me.
Best regards,
Eva Heuser
