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Do freelancers pay trade tax (Gewerbesteuer) in Germany, and what is the allowance?

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No, not for freelance work. German trade tax applies to trade businesses as the Income Tax Act defines them, and that definition excludes freelance professions. Sole traders and partnerships deduct an allowance of EUR 24,500 from their trade income before the 3.5 percent base rate applies. A GmbH or other corporation is always a trade business.

Key facts

What The law says Source
What is taxed Every standing trade business run in Germany, in the Income Tax Act’s sense of a commercial enterprise GewStG § 2(1)
Freelance work Not a trade business: the Income Tax Act definition excludes freelance professions and other independent work EStG § 15(2) sentence 1
Who is a freelancer Independent scientific, artistic, writing, teaching and educational work, and listed professions EStG § 18(1) no. 1
GmbH and other corporations Always a trade business, in full GewStG § 2(2) sentence 1
Allowance Individuals and partnerships: EUR 24,500, after rounding trade income down to full EUR 100 GewStG § 11(1) sentence 3 no. 1
Base rate 3.5 percent of trade income (Steuermesszahl) GewStG § 11(2)
Municipal multiplier The municipality applies its multiplier (Hebesatz) to the base amount; 280 percent unless it sets a higher one GewStG § 16(1), (4)
Mixed partnerships A partnership that also does commercial work counts as a trade business in full EStG § 15(3) no. 1

Freelance work or trade?

The Trade Tax Act taxes every standing trade business run in Germany, and it uses the Income Tax Act’s meaning of a commercial enterprise. The Income Tax Act defines a trade business as an independent, lasting activity with the aim of making a profit and taking part in general business, but only if it is not farming or forestry, a freelance profession or other independent work. So income from a freelance profession isn’t subject to trade tax.

The Income Tax Act lists what counts as freelance: independent scientific, artistic, writing, teaching or educational work, and professions such as doctors, lawyers, engineers, architects, tax advisers, consulting economists, journalists, interpreters and translators, plus “similar professions”.

Two cases are always trade businesses under the law. A corporation such as a GmbH counts as a trade business in full. And a partnership that carries on any commercial activity counts as a trade business in full.

How the allowance works

The tax starts from a base amount (Steuermessbetrag). The law takes your trade income, rounds it down to full EUR 100 and, for individuals and partnerships, deducts an allowance of EUR 24,500. The base rate of 3.5 percent then applies to what is left. Corporations such as a GmbH don’t get the EUR 24,500 allowance.

The base amount isn’t the tax itself. The municipality sets a multiplier (Hebesatz) that is applied to the base amount. It must be the same for all businesses in the municipality and is 280 percent unless the municipality sets a higher one (GewStG § 16(1), (4)).

Sources

  1. Gewerbesteuergesetz (GewStG), § 2 Steuergegenstand (gesetze-im-internet.de, Federal Ministry of Justice) checked 2026-10-25
  2. Gewerbesteuergesetz (GewStG), § 11 Steuermesszahl und Steuermessbetrag (gesetze-im-internet.de, Federal Ministry of Justice) checked 2026-10-25
  3. Gewerbesteuergesetz (GewStG), § 16 Hebesatz (gesetze-im-internet.de, Federal Ministry of Justice) checked 2026-10-25
  4. Einkommensteuergesetz (EStG), § 15 Einkünfte aus Gewerbebetrieb (gesetze-im-internet.de, Federal Ministry of Justice) checked 2026-10-25
  5. Einkommensteuergesetz (EStG), § 18 Selbständige Arbeit (gesetze-im-internet.de, Federal Ministry of Justice) checked 2026-10-25

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