Trade Tax, Part III: Business Tax Return

Trade Tax, Part III: Business Tax Return

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Business Tax Return

Deducting Trade Tax from Income Tax

Business tax cannot be deducted from tax as a business expense because it is considered a non-deductible business expense. This is a financial disadvantage for your business. To compensate for this disadvantage, you have the option of offsetting business tax against income tax. This means that you can reduce your income tax by a maximum of 400 percent of the trade tax.

To calculate this amount, you can use the following formula:

Reduced income tax = income tax - tax assessment amount x 3.8

We looked at how to calculate your full business tax in Part II.

Filing Your Business Tax Return

If your business is subject to trade tax, it is your responsibility to file a trade tax return. This includes the profits of your business activity including all additions, reductions, trade income, trade losses and information on the determination of losses. With the help of this information, the tax office determines the full amount to be paid by you and your business. If you operate several commercial enterprises, you must submit a separate trade tax return to the tax office for each one.

Digitale Gründung is happy to support you in your start-up process and all tax-related questions. We offer you coachings on that.


In this article, you will learn how to deduct business tax from income tax and file the appropriate business tax return.

Michelle Noss

Michelle Noss

Student of Law

Michelle Noss is a law student at the University of Cologne. She is part of the German-French double degree programme and completed a Bachelor of Law in Cologne and a Master in Paris at the Sorbonne. She is particularly interested in international issues and commercial law. Since last October, Michelle Noss has been working as a writer at MAP Rechtsanwälte and supports the firm in writing legal blog articles and topics related to digital foundation.