How is German trade tax (Gewerbesteuer) calculated?

German trade tax is calculated on the trade income (Gewerbeertrag). Starting from taxable profit, you add back certain items (e.g. 25% of interest and similar expenses above EUR 200,000, 25% of rent/lease for real estate, movable assets and royalties) and deduct trade tax loss carryforwards. The resulting trade income is reduced by an allowance of EUR 24,500 for most sole proprietors and partnerships. The remaining amount is multiplied by the basic federal rate of 3.5% and then by the municipal multiplier (Hebesatz), which is at least 200% and often between 300% and 900% depending on the municipality.

What is the trade tax allowance (Freibetrag) in Germany?

For most sole proprietors and partnerships, the trade tax allowance is EUR 24,500 per year. This means that only the trade income above EUR 24,500 is subject to trade tax. Corporations such as GmbH and AG do not receive this allowance and pay trade tax from the first euro of trade income.

What is the Hebesatz for trade tax and how do I find it?

The Hebesatz is the municipal multiplier applied to the basic trade tax rate of 3.5%. Each municipality sets its own Hebesatz, with a legal minimum of 200%. In practice, many cities use rates between 300% and 900%. To find the exact Hebesatz, you should check the website of the municipality where your business has its permanent establishment or ask your tax advisor.

Can trade tax be credited against German income tax?

Yes. For individuals and partners in partnerships, part of the trade tax can be credited against their German personal income tax. The credit is generally 4 times the trade tax base rate (i.e. 4 × 3.5% = 14%) of the trade income, limited to the amount of income tax due on the business income. Corporations cannot credit trade tax against corporate income tax.

Who has to pay German trade tax?

In principle, all commercial businesses operating in Germany are subject to trade tax. This includes corporations (e.g. GmbH, AG) and most partnerships and sole proprietors engaged in commercial activities. Certain professions considered "liberal professions" (Freie Berufe) such as doctors, lawyers, architects and some consultants are exempt as long as they meet the legal criteria and do not operate in a commercial form.

German Trade Tax (Gewerbesteuer) Calculator

Estimate your German trade tax liability by applying the federal base rate and your municipality’s Hebesatz. Includes allowances, add-backs and clear step‑by‑step explanation.

Gewerbesteuer calculator

Entity type

Partnerships/sole proprietors usually get a €24,500 allowance; corporations do not.

Taxable profit before trade tax (EUR)

Start from your taxable profit for income/corporation tax purposes.

Interest & similar expenses (EUR)

Portion above €200,000 is 25% add-back for trade tax (simplified).

Rent/lease for real estate (EUR)

Typically 50% add-back for trade tax (simplified).

Rent/lease for movable assets (EUR)

Typically 20% add-back for trade tax (simplified).

Royalties / licence fees (EUR)

Typically 25% add-back for trade tax (simplified).

Trade tax loss carryforward (EUR)

Existing Gewerbesteuer loss carryforwards from prior years.

Trade tax allowance (Freibetrag, EUR)

Standard: €24,500 for most partnerships/sole proprietors, €0 for corporations. You can override.

Municipal multiplier (Hebesatz, %)

Typical range 300–900%. Legal minimum is 200%.

Results

Adjusted profit (after add-backs): –

Trade income before allowance: –

Taxable trade income (after allowance): –

Base trade tax (3.5% of trade income): –

Effective trade tax rate: –

Estimated trade tax (Gewerbesteuer): –

This is a simplified estimate based on typical add-back rules and your Hebesatz. Actual calculations can differ; always confirm with a German tax advisor.

How the German trade tax calculator works

German trade tax (Gewerbesteuer) is a municipal tax on business income. It is calculated in several steps:

Step 1 – Adjusted profit (Gewerbeertrag before allowance)

Adjusted profit = taxable profit
+ 25% × (interest & similar expenses above €200,000)
+ 50% × (rent/lease for real estate)
+ 20% × (rent/lease for movable assets)
+ 25% × (royalties / licence fees)
− trade tax loss carryforward

The calculator applies these add-backs in a simplified way that reflects the core rules in §8 GewStG.

Step 2 – Apply trade tax allowance (Freibetrag)

Taxable trade income = max(0, Adjusted profit − allowance)

Standard allowance for most partnerships / sole proprietors: €24,500
Corporations (e.g. GmbH, AG): no allowance (0 €)

Step 3 – Apply base rate and Hebesatz

Base trade tax = 3.5% × Taxable trade income

Final trade tax = Base trade tax × (Hebesatz ÷ 100)

Effective trade tax rate ≈ 3.5% × (Hebesatz ÷ 100)

Example: Hebesatz 400% ⇒ effective rate ≈ 3.5% × 4 = 14%.

Example: GmbH in Berlin with €200,000 profit

Assume:

Entity: GmbH (corporation, no allowance)
Taxable profit: €200,000
Interest expenses: €50,000 (below €200,000 threshold → no add-back)
Real estate rent: €60,000
Movable assets rent: €10,000
Royalties: €0
Loss carryforward: €0
Hebesatz: 410% (approx. Berlin city rate, for illustration)

Calculation:

Adjusted profit = 200,000 + 50% × 60,000 + 20% × 10,000 = 200,000 + 30,000 + 2,000 = €232,000
Allowance = 0 (GmbH) ⇒ Taxable trade income = €232,000
Base trade tax = 3.5% × 232,000 = €8,120
Final trade tax = 8,120 × 4.10 ≈ €33,292
Effective rate ≈ 3.5% × 4.10 = 14.35% of taxable trade income

Key concepts: Gewerbesteuer in Germany

Who is subject to trade tax?

Corporations (GmbH, AG, UG) – always subject to trade tax on their business income.
Commercial partnerships and sole proprietors – subject to trade tax if they operate a commercial business.
Freelancers (Freie Berufe) – typically exempt if they meet the legal criteria and do not operate in a commercial form.

What is the Hebesatz?

The Hebesatz is a municipal multiplier applied to the federal base rate of 3.5%. Each municipality sets its own Hebesatz:

Legal minimum: 200%
Smaller towns: often 300–350%
Large cities: often 400–900%

You must use the Hebesatz of the municipality where your business has a permanent establishment (Betriebsstätte). If you have multiple establishments, trade income is apportioned.

Interaction with income tax and corporation tax

Corporations pay:
- Corporate income tax (Körperschaftsteuer) + solidarity surcharge
- Trade tax (Gewerbesteuer) – no credit against corporate tax
Individuals / partners in partnerships pay:
- Personal income tax on business income
- Trade tax on trade income
- But: part of the trade tax can be credited against income tax (up to 4 × 3.5% = 14% of trade income, subject to limits).

Limitations of this calculator

This tool is designed for planning and education. It simplifies several aspects of German trade tax law:

Uses typical add-back percentages and a simplified interest threshold.
Does not handle all special cases (e.g. shareholding exemptions, extended deductions for real estate companies, apportionment across municipalities).
Does not compute the income tax credit for individuals/partnerships.

For binding calculations, assessments, or complex structures (multiple permanent establishments, cross‑border situations, reorganisations), you should consult a German tax advisor (Steuerberater).

FAQ about German trade tax (Gewerbesteuer)

Is there a minimum trade tax I must pay?

There is no fixed minimum amount, but because of the allowance and the Hebesatz, small businesses with low profits may pay no trade tax at all. For partnerships and sole proprietors, trade income below €24,500 is usually fully covered by the allowance.

How do I find the correct Hebesatz for my municipality?

The Hebesatz is published by each municipality, often on its website or in local tax information. You can also ask your tax advisor or check official lists from the German tax authorities or business promotion agencies.

Does trade tax apply to foreign permanent establishments?

Generally, only income attributable to a German permanent establishment is subject to German trade tax. Income from foreign permanent establishments may be exempt under double tax treaties, but the detailed treatment depends on the specific treaty.

How often is trade tax paid?

Trade tax is usually paid in quarterly advance payments (Vorauszahlungen) based on the last assessment. After the annual tax return is filed and assessed, any difference is settled (refund or additional payment).

Can I deduct trade tax as an expense?

Since 2008, trade tax is no longer deductible as a business expense for income tax or corporation tax purposes. It is therefore a real additional tax burden on top of income or corporation tax.