Gewerbesteuer

Gewerbesteuer, also called trade tax, is a municipal tax in Germany levied on the earnings of businesses that operate a trade or commercial enterprise. It is collected by municipalities and constitutes a significant portion of their revenue, financed by local services and infrastructure. The tax is separate from national income taxes and varies by location.

Calculation: The tax base is the Gewerbeertrag, roughly the business profit, adjusted by various tax add-backs and deductions. A basic allowance of 24,500 euros applies to natural persons and partnerships; corporations generally do not receive this exemption. The base is multiplied by the Steuermesszahl of 3.5% to yield the Gewerbesteuermessbetrag, which is then multiplied by the municipality’s Hebesatz (local multiplier) to determine the final Gewerbesteuer.

Rates and scope: Actual tax rates depend on the Hebesatz and can vary widely, typically from a few hundred to over nine hundred percent of the base amount. The tax applies to commercial enterprises and certain mixed activities; pure liberal professions without a commercial trade usually escape Gewerbesteuer. Some activities in an enterprise may be variably taxable, depending on statutory definitions of Gewerbebetrieb.

Relation to other taxes: For corporations, a portion of the Gewerbesteuer may be credited against corporate income tax and the solidarity surcharge; for individuals, the tax is typically not deductible against personal income tax. The tax is nevertheless a business expense in many cases.

Administration and purpose: The Gewerbesteuer funds municipal budgets and local services. It is part of the broader German tax system and interacts with intergovernmental tax equalization mechanisms between the federal states.