The trade tax on income (Gewerbeertragsteuer) is based on the federal Trade Tax Act, but is levied by the local authorities (Gemeinde). A regional German Finanzamt is allowed to adjust their own trade tax rate depending on the value o its regional industry by using a multiplier (Hebesatz).
The trade tax deduction on income usually ranges between 7% and 20% of the business income. Trade tax is also deductible as an expense against taxable income within the year of assessment.
As an individual community is allowed to commercialize its area, the trade tax of a major German city would be much higher than the one of a community outside this city.
For this reason, the trade tax should be taken in consideration when evaluating the right location to set up your business.
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