What is Gewerbesteuer?
Gewerbesteuer (GewSt) is Germany's municipal trade tax levied on all commercial businesses. The base rate is 3.5% applied to adjusted taxable profit, then multiplied by the local Hebesatz (municipal multiplier, typically 300–500%). Effective rates range from ~10.5% to 17.5%.
Current Rate (Steuerjahr 2025)
3.5% × Hebesatz (typically 300–500%); effective ~10.5–17.5%
Example
A Munich GmbH (Hebesatz 490%) with €500,000 trade profit pays: €500,000 × 3.5% × 490% = €85,750 Gewerbesteuer. Munich is one of Germany's highest-rate municipalities.
How Gewerbesteuer works in Germany
Gewerbesteuer is Germany's municipal business tax and one of the most complex elements of the German tax system. It applies to all Gewerbetriebe (commercial businesses), including GmbHs, AGs, and Einzelunternehmen, but not to Freiberufler (liberal professionals like doctors, lawyers, architects).\n\n**Rate calculation**\nThe tax is calculated in two steps. First, the Gewerbeertrag (trade income) is determined by taking taxable profit and making specific GewSt adjustments — most notably adding back 25% of interest payments, 20% of leasing costs, and 6.25% of royalties (the Hinzurechnungen system). This adjustment base is then reduced by any available Freibeträge (allowances). The standard Freibetrag is €24,500 for individuals and partnerships (not available to GmbHs). The adjusted income is multiplied by the Steuermesszahl (base rate) of 3.5% to produce the Steuermessbetrag. This is then multiplied by the municipality's Hebesatz.\n\n**Hebesatz variation**\nThe Hebesatz is set annually by each municipality and must be at least 200%. In practice:\n- Frankfurt am Main: 460%\n- Munich: 490%\n- Hamburg: 470%\n- Berlin: 410%\n- Small rural municipalities: often 300–350%\n- Low-tax municipalities (e.g., Eschborn near Frankfurt): historically used sub-300% Hebesätze to attract businesses, but the 200% minimum was introduced specifically to prevent a zero-tax race.\n\n**Interaction with KSt**\nGewerbesteuer is not deductible as a business expense for Körperschaftsteuer purposes (since the 2008 Unternehmensteuerreform). This means GmbHs pay tax on their GewSt cost. For sole traders (Einzelunternehmen) and partnerships, 380% of the Steuermessbetrag can be credited against personal Einkommensteuer under §35 EStG — effectively eliminating most of the GewSt burden for those below a Hebesatz of around 380%.\n\n**Filing and payment**\nThe Gewerbesteuererklärung is filed with the local Finanzamt (not directly with the municipality) using ELSTER. The deadline mirrors the KSt/ESt return: 31 July (or extended to end of February with Steuerberater). Advance payments are made quarterly on 15 February, 15 May, 15 August, and 15 November based on the prior year's Messbetrag.
Related terms
Körperschaftsteuer (KSt) is Germany's corporate income tax at a flat rate of 15% on taxable profits, plus a 5.5% solidarity surcharge on the tax itself, giving an effective KSt rate of 15.825%. GmbHs and AGs also pay Gewerbesteuer separately.
GmbH (Gesellschaft mit beschränkter Haftung) is Germany's most common private limited company structure. It provides limited liability for shareholders, requires €25,000 minimum share capital (€12,500 paid up at formation), and must be formed by notarial deed and registered in the Handelsregister.
Einkommensteuer (ESt) is Germany's progressive personal income tax applying to individuals. Rates range from 0% (below €11,604 basic allowance in 2025) to 45% (above €277,826). A 5.5% Solidaritätszuschlag applies above thresholds; Kirchensteuer (church tax) of 8–9% on the ESt amount applies to church members.
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