How are companies taxed on profits
How much tax do I have to pay on my winnings?
All commercial partnerships as well as all corporations have to pay trade tax, which is the most important income of the municipalities in Germany. Freelancers therefore do not have to submit a trade tax return.
Since business tax is not calculated solely on the basis of a company's profits, it is not always easy for founders to determine its amount. The starting point for the calculation is Trade income, which basically corresponds to the income surplus or profit. The trade tax now complicates additions (§ 8 GewStG) and reductions (§ 9 GewStG) of the trade income, which are intended to prevent profits from being shifted to communities with lower trade tax. The additions and reductions are intended to show the objective profitability of a company.
The trade income before loss deduction can Commercial losses can be deducted from previous years. The resulting trade income is generally rounded down to a full 100 euros. The tax exemption of currently 24,500 euros, which only applies to partnerships, not to corporations, is deducted.
The resulting trade income is multiplied by the tax index. It has been 3.5 percent since 2008. The result is the tax assessment amount that is now with the Rate of assessment of the municipalityin which the company has its headquarters or a permanent establishment is multiplied. Because the assessment rate has a not inconsiderable influence on the level of business tax, it is a means of competition among the municipalities. In order to prevent domestic tax havens, it was set by law to at least 200 percent.
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