In this article you will learn how you can model the German trade tax.
Greenmatch offers you the possibility to map complex tax systems. Follow these instructions to map the German trade tax in a GM Valuation project.
1. Open or create a GM Valuation project and go to the “Taxes” section. There you can create a new tax object by clicking on “Add”.
2. The tax rate for the German trade tax is made up of the local business tax rate (Gewerbesteuerhebesatz) and the basic federal rate (Steuermesszahl). The local business tax rate depends on the municipality. For example, if the local business tax rate is 360% and the basic federal rate is 3.5%, the tax rate is calculated as follows:
Local business tax rate* Basic federal rate = Tax rate –> 3.6 * 0.035 = 0.126 = 12.6%
It should be noted that the so-called “70/30 rule” generally accounts for 70% of trade tax in the municipality where the plant is located and 30% at the operator’s administrative headquarters. For example, if the local business tax rate in the siting municipality is 400% and in the administrative center 320%, the tax rate is calculated as follows:
(0.7 * Local business tax rate[Plant location] * Basic federal rate) + (0.3 * Local business tax rate[Administrative center] * Basic federal rate) = Tax Rate (0.7 * 4.0 * 0.035) + (0.3 * 3.2 * 0.035) = 0.1316 = 13.16%
Please enter the corresponding tax rate for your project in greenmatch in the “Rate” input field.
3. Select “Tax effective EBT with additions” from the drop-down menu as “Reference”.
4. For the German trade tax, 50% of the operating costs of the land lease category and 100% of debt interests are added to the tax reference. Please enter the following inputs in the “Additions” input fields:
- Opex with category Landlease: 50
- Debt Interests: 100
5. Activate the option “Yearly Allowance on Additions”
6. Now you have the option of entering an allowance for additions (tax free amount) and the fraction of additions that are added to the EBT. For the German trade tax, only additions exceeding the amount of EUR 100.000 in a year (Allowance) are taken into account. 25% of these additions are added to the EBT. Accordingly you have to make the following inputs:
- Yearly Allowance on Additions: 200,000
- Fraction of additions above allowance to add to EBT: 25
7. If the EBT of the actual period is exceeding EUR 1.000.000, then only 60% of the exceeding amount can be offset with loss carried forward. Accordingly, select the entry “Limited by Amount” in the input field “Loss Carried Forward”. Now you can enter 1,000,000 in the input field “Limiting amount to which the loss carried forward can be fully offset” and 60% for “Percentage of the tax reference exceeding the limit that can be offset with loss carried forward”.
8. There is an allowance of EUR 24,500 on the tax reference for trade tax. This means that no trade tax is due on profits up to this amount. Accordingly, you must activate the option “Is there an allowance?” and enter 24,500 in the input field “Allowance”.
9. Finally, you can define the month in which the taxes are paid under the “Payment Target” input field.
Payment Target 0 months: The tax payment will be in December of the fiscal year
Payment Target 3 months: The tax payment will be in March of the following year
Payment Target 6 months: The tax payment will be in June of the following year
After you have made these entries, you can generate the tax object by clicking on “Save”.
Note: greenmatch AG accepts no liability whatsoever for the data published here regarding the basic federal rate (Steuermesszahl), tax allowances (Freibeträge), use of loss carry forwards, etc. We recommend to consult a tax expert for tax related questions (e.g. our partner Sterr-Kölln & Partner mbB).