What impact does the trade tax have on my income tax return?
June 24, 2024 | 30,00 EUR | answered by Eva Heuser
Dear tax consultant,
My name is Anna Völker and I have been running a small business in the events industry for two years. This year, I had to pay trade tax for the first time and I am wondering what impact this will have on my income tax return.
I have been doing my income tax return myself so far, but I am still unsure about the topic of trade tax. I am afraid that my income tax may increase due to the trade tax and I would like to know how I can prepare for this. I am concerned that I may have to pay additional taxes and I would like to know if there are ways to avoid this.
Can you explain to me how trade tax affects my income tax return and what implications it can have? Are there specific regulations or strategies to minimize the tax burden? I would greatly appreciate your help and advice.
Thank you in advance.
Sincerely,
Anna Völker
Dear Mrs. Völker,
thank you for your question regarding the trade tax and its impact on your income tax return. It is understandable that you feel uncertain, as tax matters are often complex. I would be happy to explain to you how the trade tax affects your income tax return and what measures you can take to minimize your tax burden.
Trade tax is a tax paid by tradespeople on their income from trade. It is levied by municipalities and is based on the trade profit, that is, the company's earnings. Trade tax is a business expense and therefore reduces your profit in the income tax return. This may result in a decrease in your income tax burden, as the trade tax expense has a tax-reducing effect.
However, there are also cases where trade tax can lead to a higher income tax. This is especially the case when the trade tax exceeds the profit and therefore the trade loss cannot be fully offset with other income. In this case, you may have to pay additional taxes in your income tax return.
To avoid a potential additional tax payment and minimize your tax burden, there are various options. Firstly, you can check if you can benefit from certain tax advantages or exemptions to reduce your tax burden. Secondly, you can also consider whether it makes sense to incur certain business expenses to reduce your company's profit.
It is advisable to consult with a tax advisor to discuss your individual situation and develop measures together to optimize your tax burden. A professional tax advisor can help you determine your tax obligations and options, and assist you in preparing your income tax return.
I hope that this information has been helpful to you. If you have any further questions or require personalized advice, I am at your disposal.
Best regards,
Eva Heuser, Tax Advisor
