Setting up a business - Ways to self-employment

Amount of income tax

The amount of income tax is oriented towards the personal profit, which you generate (less all operational expenses) with your company. In the first year of your self-employment the tax office assumes that the information you provide on your expected profit is correct.

A basic allowance of 7,664 euros of the taxable income per person remains tax-free. Income in excess of the basic allowance has to be taxed.

Income tax return to the tax office

Your income tax is due at the end of the calendar year – by 31 May of the following year at the latest. In order to determine the amount, you have to submit your income tax return to the tax office responsible for you personally. Only a tax consultant may request that the deadline for submitting the income tax return be extended up to 30 September. You have to list your entire earnings in the income tax return.

Non-incorporated companies not subject to income tax

Non-incorporated companies, such as e.g. the GbR, are not subject to income taxation. The individual partners are, however, subject to tax. They have to submit and pay tax on their share of the company’s profit within the scope of their income tax return. The non-incorporated company has to submit a return to the tax office for separate and standard determination of the profit.

Prepaying income tax

Every year the tax office determines a specific sum, which you have to pay in advance quarterly. The tax return for the entire previous year is then prepared in the following year and, if necessary, any still existing tax liability offset against the prepayments.
The income tax prepayments are always due on

The tax office determines the amount of advance payment.

Please note:

If your income is higher than expected, you can expect a subsequent tax payment in the following year. The subsequent tax payment plus the income tax advance payment have caused financial problems for more than one new start-up entrepreneur in the past. So, expect the tax. Find out from your tax consultant, if and what amount of subsequent tax payment you can expect, and set money aside for it.