Trade tax; receipt of the assessment notice

The starting point is the profit under income and corporation tax law, which is, however, modified by additions and deductions. The municipalities are entitled to trade tax.

The tax is determined in a staged procedure.

• In the first stage, the tax offices determine the trade income and multiply this by a percentage, which is referred to as the tax base. The result is the so-called tax assessment amount, which is determined by the responsible tax office in a separate assessment, the so-called tax assessment notice.

• The respective municipality applies a multiplier (assessment rate) to these tax assessment amounts determined by the state tax authorities, which it must specify in a local bylaw. This multiplication results in the trade tax to be paid, which the municipality determines in the trade tax assessment notice. The municipality has broad discretion in determining the level of the assessment rate. With effect from the 2004 tax period, the law of 23 December 2003 (BGBl I p. 2922) stipulated a minimum assessment rate of 200% (Section 16 (4) sentence 2 GewStG).

All traders whose business income exceeds €24,500 are liable for trade tax. The aforementioned allowance does not apply to limited companies, such as GmbHs. The current assessment rate is 360% (since 2004).