Trade tax - an overview.

Trade tax is one of the most important types of tax in Germany and is levied on companies that operate a commercial business. It is a municipal tax and is set by the individual cities and municipalities. The amount of trade tax depends on the company's commercial income and can vary depending on the municipality. Trade tax is a real tax because it is directly linked to the company and not to profit or turnover. It is levied on the commercial income, which results from the company's profit minus certain allowances and additions. Trade tax is therefore a business tax that is levied independently of income tax and corporation tax. Trade tax is an important source of income for municipalities because it helps finance infrastructure and public services. The amount of trade tax can vary greatly depending on the municipality and depends on various factors such as the assessment rate and the trade tax levy. The assessment rate is set individually by each municipality and can be between 200 and 900 percent. Companies can claim trade tax as a business expense and thus reduce their tax burden. However, trade tax is not deductible from income tax or corporation tax, as it is a separate type of tax. In Germany, there are various allowances and additions that can affect trade income. These include, for example, the allowance of 24,500 euros and the addition of rent and lease payments. Companies should therefore carefully check their trade tax liability and, if necessary, consult a tax advisor or auditor. Overall, trade tax is an important type of tax in Germany that helps finance local authorities and strengthen the economy. Companies should therefore familiarize themselves with the trade tax regulations and optimize their tax burden in order to remain competitive.

Section I: Introduction

Trade tax is one of the most important types of tax in Germany and plays a crucial role both for companies and for the financing of municipalities. With its direct link to the commercial income of companies, it represents an important source of income for cities and municipalities. Trade tax is a business tax that is levied independently of income tax and corporation tax and is therefore an independent type of tax.This overview is devoted to the comprehensive analysis of trade tax in Germany. It examines the historical development, the legal basis, the calculation and assessment of trade tax and its effects on companies and municipalities. In addition, critical aspects and reform proposals are discussed in order to provide a holistic insight into the topic.The aim of this overview is to provide a sound understanding of trade tax and to clarify its importance in the German tax system. By analyzing international comparisons and best practices, suggestions for an efficient design of trade tax are also to be shown. Overall, the presentation should help to present the complex matter of trade tax transparently and show possible options for action for companies and municipalities.

Section II: Historical development of trade tax

The historical development of trade tax in Germany goes back to the 19th century. Here are the most important stages in its creation and development:1. Origin:The trade tax was first introduced in the 19th century to make traders share in the municipal burdens. At that time, the trade tax was purely a municipal tax and was intended to offset the financial burdens on municipalities.2. Legal basis:The trade tax was anchored in law over time and is now regulated in the Trade Tax Act (GewStG). The Trade Tax Act regulates, among other things, the assessment basis, the determination and the collection of trade tax.3. Development over time:Over the course of history, the trade tax has been reformed and adjusted several times. For example, allowances were introduced to relieve the burden on small and medium-sized companies. The calculation methods and tax rates have also been changed over time to make the trade tax fairer and more efficient.4. Importance in the tax system:The trade tax has developed over time into one of the most important types of tax in Germany. It is an important source of income for municipalities and makes a significant contribution to financing infrastructure measures and public services.5. Current developments:The trade tax has recently been the subject of repeated critical discussions. In particular, the complexity and the different structures in individual municipalities are leading to debates about a possible reform of the trade tax.Overall, the historical development of the trade tax in Germany shows its importance as an important type of tax for financing municipalities and as an instrument for businesses to share in municipal burdens. The continuous adaptation and further development of the trade tax reflects the changes in the economic and tax landscape and highlights its relevance in the German tax system.

Section III: Legal basis of trade tax

Trade tax is one of the most important types of tax in Germany and is subject to clear legal regulations. In this section, the legal basis of trade tax is examined in more detail in order to create an understanding of how it works and its importance in the German tax system.1. Definition and delimitation of trade tax:Trade tax is a municipal tax that is levied on companies that operate a commercial business. It is a business tax that is levied independently of income tax and corporation tax. Trade tax is used to finance municipalities and is set by individual cities and municipalities.2. Responsibility and assessment of trade tax:Responsibility for trade tax lies with the municipalities, which set the assessment rate and determine the trade tax. The assessment rate varies depending on the municipality and can be between 200 and 900 percent. Trade tax is calculated on the basis of a company's commercial income.3. Tax object and tax subject of trade tax:The tax object of trade tax is the commercial income, which results from the company's profit less certain allowances and additions. The tax subject of trade tax is the companies that operate a commercial business. Trade tax is levied regardless of the legal form of the company and affects both sole proprietorships and corporations. The legal basis of trade tax determines how the tax is levied, who is liable to pay tax and how the assessment basis is determined. Trade tax is closely linked to the financing of municipalities and plays an important role in the German tax landscape. A precise understanding of the legal basis is therefore crucial in order to understand how trade tax works and what it means.

Section IV: Calculation and assessment of trade taxThe calculation and assessment of trade tax is based on the trade income of a company. In this section, the various aspects of the calculation and assessment of trade tax are explained in more detail in order to provide an understanding of the tax burden on companies.1. Trade income as the assessment basis:The trade income forms the basis for calculating trade tax. It consists of the company's profit less certain allowances and additions. The trade income is determined in the company's trade tax return and forms the basis for the assessment of trade tax by the municipality.2. Allowances and additions:To determine trade income, there are certain allowances that are deducted from the profit achieved. These include, for example, the allowance of 24,500 euros for natural persons and partnerships. There are also additions that can increase trade income, such as rent and lease payments.3. Assessment rate and trade tax levy:The assessment rate is set individually by each municipality and influences the amount of trade tax. It is applied to the calculated trade tax assessment amount in order to determine the company's specific tax liability. There is also the trade tax levy, which is set by the federal states and supports the municipalities in financing the trade tax.4. Tax treatment of trade tax:The trade tax is tax-deductible as a business expense and thus reduces the company's profit. However, it is not deductible from income tax or corporation tax, as it is a separate type of tax. Companies should take the tax implications of trade tax into account when planning and optimizing their taxes.The calculation and assessment of trade tax is a complex process based on a company's trade income. Companies should carefully examine the various aspects of trade tax and, where necessary, use tax planning options to optimize their tax burden. A precise understanding of the calculation and assessment of trade tax is therefore crucial in order to understand and minimize the tax burden on companies.

Section V: Impact of trade tax on companies

Trade tax has a direct impact on companies because they have to pay part of their profits as tax. This section takes a closer look at the burdens of trade tax, tax planning options for optimising the trade tax burden and a comparison with other types of taxes.1. Burden on companies through trade tax:Trade tax burdens companies in their economic activities because they have to pay part of their profits to the municipalities. The amount of trade tax can vary depending on the municipality and the assessment rate and therefore represents an individual burden for each company. Companies must include trade tax in their calculations and planning in order to take their financial situation into account.2. Tax planning options and optimising the trade tax burden:Companies have various tax planning options to optimise their trade tax burden. These include, for example, the use of allowances, targeted tax optimisation through depreciation and investments and the choice of location in relation to the trade tax assessment rate. Careful tax planning can help to minimise the trade tax burden and strengthen the company's competitiveness.3. Comparison of trade tax with other types of taxes: Trade tax differs from other types of taxes such as income tax and corporate tax because it is directly linked to the company and not to profit or turnover. Compared to other taxes, trade tax is particularly important for municipalities because it makes a significant contribution to financing infrastructure and public services. Companies should know the differences and similarities between the various types of taxes in order to take a holistic view of their tax situation. Trade tax has a direct impact on companies and represents an important tax burden. Companies should carefully examine the trade tax burden and use tax planning options to optimize their tax burden. A comparison with other types of taxes can also help to understand the special features of trade tax and improve their tax planning.

Section VI: Importance of trade tax for municipalities

Trade tax plays a crucial role in the financing of municipalities in Germany. This section takes a closer look at the importance of trade tax for municipalities in order to illustrate how trade tax contributes to the financing of infrastructure and public services and what impact it has on the economic structure of a municipality.1. Financing of infrastructure and public services:Trade tax is an important source of income for municipalities and makes a significant contribution to the financing of infrastructure measures such as road construction, schools, kindergartens and public facilities. The income from trade tax enables municipalities to fulfil their tasks in the area of public services and ensure the quality of life of citizens.2. Impact of trade tax on the economic structure of a municipality:The level of the trade tax assessment rate can influence the establishment of companies in a municipality. A high assessment rate can deter companies and lead to a relocation of locations, while a low assessment rate can create incentives for companies to settle in a municipality. Trade tax therefore has a direct impact on the economic structure of a municipality and can contribute to strengthening or weakening the business location.3. Role of trade tax in the municipal budget: Trade tax is one of the most important sources of income in the municipal budget and makes a significant contribution to financing municipal tasks. Revenue from trade tax flows into the general budget of the municipality and is used to finance investments, personnel and material costs as well as to cover general financial needs. A stable and sufficient trade tax is therefore crucial for the financial performance of a municipality. Trade tax plays a central role in the financing of municipalities and has a direct impact on the economic structure of a municipality. The revenue from trade tax enables municipalities to fulfill their tasks in the area of public services and to ensure the quality of life of their citizens. A balanced and efficient use of trade tax is therefore crucial for the development and stability of a municipality.

Section VII: Criticism and need for reform of the trade taxDespite its importance for municipalities and companies, the trade tax is also the subject of criticism and discussion. In this section, the most important criticisms of the trade tax are highlighted, reform proposals are discussed and a look is taken at the possible future of the trade tax in Germany1. Criticisms of the trade tax- Complexity: The trade tax is often perceived as complicated and opaque due to its diverse regulations and differences between municipalities.- Inequality: The trade tax burdens companies regardless of their actual economic situation and can have a disproportionately strong impact on small and medium-sized companies in particular.- Location disadvantages: High assessment rates in certain municipalities can lead to companies deciding against settling there and thus have a negative impact on the economic structure.2. Proposals for reforming and simplifying trade tax - Harmonization: Standardizing the regulations and assessment rates could reduce the complexity of trade tax and ensure greater transparency. - Adjusting allowances: Adjusting allowances and additions could help to relieve the burden on small and medium-sized companies and make the burden fairer. - Digitization: Digitizing trade tax returns and accounting could reduce administrative costs and increase efficiency. 3. Discussion about the future of trade tax in Germany - Debate about abolition: In political discussions, the abolition of trade tax is repeatedly mentioned as an option in order to strengthen the competitiveness of companies and simplify the tax landscape. - Alternatives: Possible alternatives to trade tax include higher taxation of capital income or a reform of municipal financial equalization. The criticism of trade tax and the discussion about reforms show that action is needed to make trade tax fairer and more efficient. A reform of trade tax could help to reduce the burden on companies and secure the financing of municipalities in the long term. The future of trade tax in Germany therefore depends on a constructive debate and possible reforms.

Section VIII: International comparisons and best practices

Trade tax is a specific type of tax that is handled differently in different countries. This section makes international comparisons and presents successful models and best practices from abroad in order to provide possible suggestions for the design and optimization of trade tax in Germany.1. Comparison of trade tax with other countries:- USA: In the USA there is no trade tax at the federal level, but many states and cities levy their own trade taxes. Trade taxes in the USA can vary depending on the state and municipality and have a direct impact on the economic structure.- Switzerland: In Switzerland, trade tax is levied by the cantons and varies greatly between the individual cantons. Trade tax is an important source of income for the cantons and plays a crucial role in financing public tasks.- Scandinavian countries: In the Scandinavian countries such as Sweden, Norway and Denmark there are also trade taxes, but they are often lower than in Germany. Trade tax is seen there as an important source of income for municipalities to finance municipal infrastructure.2. Successful models and suggestions from abroad: - Simplification of trade tax: Some countries have reformed and simplified trade tax to reduce administrative costs and increase transparency. Clear regulations and uniform assessment rates have improved the efficiency of trade tax. - Adaptation to economic developments: Some countries regularly adapt their trade tax regulations to economic developments in order to make the burden fair for companies and create incentives for investment. A flexible design of trade tax can help to strengthen the economic structure and make the location attractive. International comparisons and best practices can provide valuable impulses for the design and optimization of trade tax in Germany. By looking beyond the national borders, successful models and innovative approaches can be identified to make trade tax more efficient and fairer. An exchange with other countries can help to make trade tax in Germany future-proof and strengthen the competitiveness of companies.

It is up to every company in Germany to deal with the trade tax situation at its current location and to think through how sensible it might be to set up a new company or relocate to 07937 Langenwolschendorf in Thuringia to the BCLW Business Center Langenwolschendorf with the lowest trade tax rate in Germany of only 200%.