Trade tax
Taxable unit of the trade tax is the business entity and its objective earning capacity. Every business entity is subject to trade tax, as far as it is operated in Germany. A business entity is to be understood as a trade undertaking in the intentions of the income tax act. Permanent establishments of foreign business are subject to trade tax as well. Activities, which are to be regarded as the conduct of agriculture and forestry or the conduct of a free-lance profession or any other independent personal service, are not subject to trade tax.
The basis for taxation is the income from the business (Gewerbeertrag). This amount is the profit to be determined from this business entity pursuant to the regulations of the income tax act and the corporation tax act, increased or decreased by certain amounts, which accommodates the impersonal tax character of the trade tax and e.g. is intended to avoid double burden with trade and real property tax.
When calculating the trade tax, the tax office initially determines the taxation bases and then the so-called tax rate (Steuermessbetrag). The trade tax is determined and levied by the respective municipality on the basis of this assessment base with a special multiplier (Hebesatz). This multiplier is determined by the municipality.
For further information see information sheet trade tax.
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