German Trade Tax is a municipal business tax in Germany, levied on the profits of commercial enterprises in addition to federal corporate or income tax.
Gewerbesteuer is the German municipal trade tax, payable by commercial enterprises (Gewerbebetriebe) carried out in Germany. It is collected by municipalities (Gemeinden) and is one of their main revenue sources. The base is broadly the trade profit (Gewerbeertrag), which starts from taxable income and is adjusted by trade-tax-specific add-backs (e.g., portions of interest, rents, royalties) and deductions.
Gewerbesteuer is computed as base rate (3.5%) multiplied by a municipal multiplier (Hebesatz) set locally. Hebesatz typically ranges from 200% (in low-tax municipalities) to over 500% in big cities. As a result, the effective trade-tax rate ranges from about 7% to 17%. Combined with corporate income tax (15%) and the solidarity surcharge (5.5% of CIT), the typical total burden on a German GmbH is around 30%.
The Hebesatz is a real lever: setting up a GmbH in a low-Hebesatz municipality (such as parts of Brandenburg or Bavaria) can save several percentage points compared to Munich or Frankfurt. Sole traders and partnerships benefit from a partial credit of trade tax against personal income tax (section 35 EStG), which makes the overall load more comparable.
You will face Gewerbesteuer whenever you operate a commercial enterprise through a German GmbH, GmbH & Co. KG, or other Gewerbebetrieb, when choosing a registered office (the Hebesatz of the municipality matters), and when modelling the German effective tax rate against alternative European jurisdictions.
See what a company actually costs in year one, and how the jurisdictions compare on tax, capital and timeline.
