German Company Taxes

Intention to realize a profit

The aim of the so-called "winning goal" is to see an entrepreneur strive to achieve a profit in the long term by means of his self-employed activity.

This of course also makes itself felt positively (in the case of the tax office) in the tax declaration. Profit is an essential feature of self-employed person travel such as tradesmen, freelancers, forestry and farmers as well as landlords. If the financial authority cannot recognize a clear goal to gain profit as a self-employed person for a long time, this can lead to problems with the tax declaration.

When there is no longer any profit intention from the point of view of the tax authorities.

Many self-employed people have losses, especially in the first years of their entrepreneurial activity, so there is no taxable profit in taxation. However, if the financial department realizes that these losses persist permanently and there is no prospect of a profit being made or no effort on the part of the entrepreneur to move out of the loss zone, it becomes problematic for you as an entrepreneur. Since then the financial authority may tend to look at your activity as a hobby.This is then assigned to private life. This has the effect that you can no longer claim tax losses. It is therefore important that you always have a credible proof of making profit. You will need supporting documents for appropriate countermeasures in the event of permanent losses.

It does not always have to be a hobby

Longer lasting losses do not always have to lead to the conversion of your activity to hobby, as long as this activity can lead to positive income in the long term. Even if you are self-employed, but after years of losses, you cannot make any profits they won’t call this activity a hobby.

As long as the business is "running" and you gain profit, the tax office will not consider this as a hobby. If, however you only generate losses in the long run, there is an economic imbalance that you should fix. Get the best professional support from a tax consultant or business adviser. After all, it is also in your interest to make money and not just to invest.