How do companies pay taxes

Taxes for the self-employed: what taxes do I have to pay?

Everyone has to pay taxes - including you as a founder and self-employed. We'll show you what income tax, trade tax, sales tax & Co. is all about.

Do you know your way around the German tax jungle? Do you know what taxes you have to pay as a founder? We'll show you what taxes you have to pay - and how you can calculate them.

Pay taxes as a sole trader and partnership

If you are a sole trader or a partnership, three types of tax are relevant for you: income tax, trade tax and sales tax.

Income tax for partnerships and sole proprietorships

With income tax - as the name suggests - your income is taxed. So your profit minus special expenses (e.g. private health insurance, maintenance, donations, etc.) or extraordinary expenses.

If you earn less than € 8,600 a year (basic tax credit), you do not pay any income tax. If you earn more, the tax rate varies between 6% and 42% plus church tax or solidarity surcharge, depending on your income.

And this is how income tax is calculated:

Taxable income x income tax rate = income tax

The manual calculation of income tax is relatively complicated, which is why there is an official income tax calculator on the website of the Federal Ministry of Finance.

Trade tax for partnerships and sole proprietorships

If you run a business as a sole trader or partnership, trade tax is due from a trade income of € 24,500. The trade income usually corresponds to your profit. This is first multiplied by the tax index of 3.5% and then by the tax rate.

The formula for calculating the trade tax is:

Trade income x 3.5% x tax rate = trade tax

While the tax index is always calculated at a flat rate of 3.5%, the assessment rate varies depending on the location of your company. Your municipality determines the rate of assessment individually.

By the way: The trade tax is offset against your income tax. So the load remains roughly the same.

Sales tax for partnerships and sole proprietorships

The third important tax that you have to pay as a sole trader or partnership is sales tax. But here, too, there is a certain amount of allowance. If your turnover remains below € 22,000 per year, you are considered a small business owner and do not have to pay sales tax.

For all others the calculation applies:

Sales x sales tax rate (7% / 19%) = sales tax

Danger: As a small business owner, you have to indicate on your invoices that you are exempt from sales tax. Sales taxpayers, however, have to show sales tax on their invoices.

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Pay taxes as a corporation

If you are a partner in a corporation, the tax calculation works a little differently. Income tax is called corporate income tax here. In addition, trade tax, sales tax and capital gains tax are due.

Corporate income tax for corporations

Corporations have to pay corporation tax instead of income tax. In contrast to income tax, corporate income tax is calculated at a flat rate of 15% of taxable income plus solidarity surcharge, i.e. a total of 15.825%. There is no allowance.

Calculation of corporate income tax:

Taxable income x 15.825% = corporation tax including solos

Trade tax for corporations

The calculation of the trade tax for corporations is analogous to the trade tax for sole proprietorships. Unfortunately, as a corporation, you cannot claim an allowance here either.

Calculation of business tax:

Trade income x 3.5% x tax rate = trade tax

Capital gains tax for corporations

Capital gains tax is a tax that only corporations have to pay. It is due for dividends or distributions to the shareholders.

The investment income tax is 25% of the investment income plus solidarity surcharge and church tax. The tax rate is therefore: 26.375% (excluding church tax), 27.8186% (8% church tax) or 27.9951% (9% church tax).

Calculation of capital gains tax:

Investment income x tax rate = investment income tax

Sales tax for corporations

You are already familiar with this tax from sole proprietorships and partnerships. Corporations can also rejoice here, because the tax exemption of € 22,000 in sales (small business regulation) also applies to them.

The calculation is carried out in the same way:

Sales x sales tax rate (7% / 19%) = sales tax

tip: When writing the invoice, make sure that you are applying the correct tax rate for your services or products.

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Get a financial cushion for your tax payments

Have you calculated your tax burden with a thumbs-up? As you can see, amounts in the three-digit range can quickly come to you here. However, so that the entire tax burden does not come down to you in one fell swoop at the end of the year, the tax office has set regular advance payments. You probably already know the VAT return and the income tax advance payment.

Nevertheless, you should get yourself a financial cushion for your tax payments. For example, in the event that you have to pay back.

By the way: If you have to show sales tax on your invoices, you can easily do so in the Debitoor invoicing program - even when you are out and about using the mobile app.