Who is required to complete Form G (Income from Business Operations)?
A business as defined in Section 15 of the Income Tax Act exists if you engage in an activity independently (i.e., on your own account and responsibility), on a sustainable basis (i.e., not a one-off action), with the intention of making a profit (i.e., not a hobby), and participate in general economic transactions (i.e., appear externally). However, these conditions also apply in the same way to freelance work as per Section 18 of the Income Tax Act (H 15.6 EStR).
Businesses include
- Craft and industrial enterprises,
- Trading businesses,
- Brokerage activities (e.g., insurance agents, brokers, or commercial agents),
- Catering businesses,
- Service companies.
- Corporations such as public limited companies (AG) and limited liability companies (GmbH) are businesses by virtue of their legal form (Section 2 (2) GewStG).
Income from business also includes
- Profit shares from participation in a partnership (oHG, KG, or commercial GbR).
- Income from the sale of a business, part of a business, or a share in a business (Section 16 of the Income Tax Act).
- Gains from the sale of a share in a corporation if this amounts to at least 1% of the share capital (Section 17 of the Income Tax Act). This also applies to private investors. Since 2009, the partial income procedure applies, i.e., 60% of the capital gain is taxable and 40% is tax-free (Section 3 No. 40 letter c of the Income Tax Act). For shares acquired before 2009, the half-income procedure with its half taxation still applies.
For a shareholding of less than 1% of the share capital, the capital gain has been fully taxable as capital income since 2009, regardless of the holding period, and is subject to the withholding tax of 25%. However, this only applies to shares acquired from 2009 onwards (Section 20 (2) No. 1 of the Income Tax Act). For acquisitions before 2009, the previous legal situation remains, according to which a capital gain is tax-free after a holding period of 12 months. Distributions are subject to withholding tax in both cases from 2009 onwards.
- Income from the sale of more than 3 properties within 5 years. In this case, the tax office assumes commercial property trading, regardless of the 10-year period. For the sale of up to three properties, the capital gains are usually only taxable within the so-called speculation period of 10 years, as "other income".
- Income from the rental of holiday homes if the type of rental is comparable to a commercial accommodation business. Otherwise, it is "income from renting and leasing".
- Professional guardians according to Sections 1896 ff. BGB have not generated income from business since 2010, contrary to previous opinion, but from "other self-employed work" according to Section 18 (1) No. 3 of the Income Tax Act (BFH rulings of 15.6.2010, BStBl. 2010 II p. 906 and 909).
