Trade tax (Gewerbesteuer)

Gewerbesteuer (trade tax) is a tax on the profits of commercial businesses in Germany – and one of the most important sources of income for municipalities.

Who pays trade tax?

• All commercial businesses: sole traders, general partnerships (OHG), limited partnerships (KG), GmbH, AG
• NOT: freelance professionals (doctors, lawyers, architects, artists – §18 EStG)
• NOT: agriculture and forestry

Calculation:

• Step 1: determine the profit (trade income)
• Step 2: deduct the allowance: €24,500 (only for partnerships/sole traders, NOT for a GmbH!)
• Step 3: apply the base rate: 3.5%
• Step 4: apply the municipality's multiplier (typically 200–900%)

Sample calculation (sole trader, €80,000 profit, Munich multiplier 490%):

• Trade income: 80,000 − 24,500 allowance = €55,500
• Base amount: 55,500 × 3.5% = €1,943
• Trade tax: 1,943 × 490% = €9,519

The credit (§35 EStG):

• For partnerships/sole traders, trade tax is partly credited against income tax
• Factor: 4 times the base amount
• With low multipliers (under ~400%), trade tax is almost fully offset!

Multipliers (examples):

• Munich: 490% | Berlin: 410% | Frankfurt: 460% | Monheim am Rhein: 250% (lowest in North Rhine-Westphalia)