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German relief for undrawn profits (Anlage 34a)

Where taxable income includes profits from farming and forestry, a trade or a profession that have NOT BEEN WITHDRAWN, income tax on those profits is, on application, computed wholly or partly at a reduced rate: 28.25 per cent for assessment periods UP TO 2027, 27 per cent for 2028 and 2029, 26 per cent for 2030 and 2031, and 25 per cent from 2032 (§ 34a(1) sentence 1 EStG). The price of that relief is a LATER clawback: where the positive balance of withdrawals and contributions in a financial year exceeds the profit, a clawback charge arises, and income tax on the clawback amount is 25 per cent (§ 34a(4) sentences 1 and 2 EStG). The relief defers, it does not forgive.

Up to date for 2025 — verified on October 3, 2026Official procedure, no printed formGuide: about 40 min

Deadlines

The application must be made separately for EACH business and EACH assessment period
§ 34a(1) sentence 2 EStG — to the tax office competent for income taxation
Withdrawal possible until the income tax assessment for the NEXT assessment period becomes final
§ 34a(1) sentence 5 EStG — the assessment is then amended accordingly, and the limitation period does not end before that (sentence 6)
Annually: separate determination of the amount subject to clawback
§ 34a(3) sentence 3 EStG — for each business or partnership interest

Documents to prepare

  • ELSTER access with a certificate or an ELSTER business account
  • The business profit computed under § 4(1) sentence 1 or § 5 EStG
  • Withdrawals and contributions for the financial year, recorded separately
  • Trade tax for the financial year
  • For partnership interests: the share of the computed profit, in per cent and in euros
  • The amount subject to clawback determined at the end of the previous year
  • Details of any asset transfers under § 6(5) EStG
See the procedure on the official site

No form is attached to this procedure: the link leads to the official page that describes it.

What this page gives you

The guide above and the link to the official site. ActioFin does not produce any document for this page: whatever you fill in or file is done on the official medium.

Who this applies to

  • Sole traders and partners with income from farming and forestry, a trade or a profession (§ 2(1) sentence 1 nos. 1 to 3), to the extent profits stay in the business (§ 34a(1) sentence 1 EStG)
  • For partnership interests ONLY where the share of the profit computed under § 4(1) sentence 1 or § 5 EStG exceeds 10 PER CENT or exceeds 10 000 EUROS (§ 34a(1) sentence 4 EStG)
  • Anyone computing profit under § 4(1) sentence 1 or § 5 EStG: those are the two methods § 34a(2) sentence 1 EStG names for the undrawn profit
  • NOT available to the extent the allowance under § 16(4) or the relief under § 34(3) EStG is claimed for those profits (§ 34a(1) sentence 1 EStG)
  • NOT available for profits under § 18(1) no. 4 EStG (§ 34a(1) sentence 1 EStG)
  • Anyone who is an opting partnership under § 1a KStG no longer faces the question: they are taxed like a corporation in any event, and profit shares count as distributed only once withdrawn

Worked example

Andreas Kohl, a sole trader in toolmaking, leaves profit in the business in 2025

His profit computed under § 4(1) sentence 1 EStG is 200 000 euros. During the financial year he withdraws 80 000 euros and contributes nothing; trade tax for the year is 15 000 euros. The undrawn profit is the profit computed, reduced by the positive balance of withdrawals and contributions, INCREASED by the trade tax of the financial year (§ 34a(2) sentence 1 EStG): 200 000 − 80 000 + 15 000 = 135 000 euros. If Andreas applies for the relief in full, income tax on those 135 000 euros for the 2025 assessment period is computed at 28.25 per cent (§ 34a(1) sentence 1 no. 1 EStG), that is 38 137.50 euros. Whether that leaves him better off depends solely on his personal rate on the same amount — this page states no tariff; the income tax tariff calculator works it out. Two things Andreas has to plan for. First the clawback: if in a later year he withdraws more than he earns, the clawback amount is taxed at 25 per cent (§ 34a(4) sentences 1 and 2 EStG) — the relief is a deferral. Second, the current year's cash: in setting advance instalments the relief under § 34a is expressly LEFT OUT OF ACCOUNT (§ 37(3) sentence 5 EStG). His instalments therefore do not fall because of the application.

How to fill it in, step by step

  1. Check the profit computation first: § 34a(2) sentence 1 EStG ties the undrawn profit to profit computed under § 4(1) sentence 1 or § 5 EStG.
  2. For a partnership interest, check the threshold: the share must exceed 10 per cent OR exceed 10 000 euros (§ 34a(1) sentence 4 EStG).
  3. Compute the undrawn profit: profit computed, MINUS the positive balance of withdrawals and contributions for the financial year, PLUS the trade tax of that year (§ 34a(2) sentence 1 EStG).
  4. In doing so, leave out of account withdrawals made to pay the income tax under § 34a(1) sentence 1 and the solidarity surcharge on it (§ 34a(2) sentence 2 EStG).
  5. Check the exclusions: no § 34a to the extent the allowance under § 16(4) or the relief under § 34(3) EStG is claimed, and none for profits under § 18(1) no. 4 EStG (§ 34a(1) sentence 1 EStG).
  6. Decide whether to apply WHOLLY or PARTLY — the statute allows both (§ 34a(1) sentence 1 EStG).
  7. Log in to Mein ELSTER and file Anlage 34a with the income tax return; the application must be made separately for each business and each assessment period (§ 34a(1) sentence 2 EStG).
  8. Track the amount subject to clawback determined separately each year (§ 34a(3) sentence 3 EStG) — it is the balance a later clawback draws on.
  9. Do NOT count on lower advance instalments: the relief under § 34a is left out of account when they are set (§ 37(3) sentence 5 EStG).

Good to know

  • The rate is DATED in the statute itself and steps down: 28.25 per cent up to 2027, 27 per cent for 2028 and 2029, 26 per cent for 2030 and 2031, 25 per cent from 2032 (§ 34a(1) sentence 1 EStG). From 2032 the relief rate equals the clawback rate.
  • The trade tax of the financial year is ADDED BACK to the undrawn profit (§ 34a(2) sentence 1 EStG) — it therefore increases the amount eligible for relief even though it has been paid out.
  • Withdrawals count PRIMARILY, up to the income tax under subsection 1 and the solidarity surcharge on it, as used to pay those amounts (§ 34a(2) sentence 3 EStG) — so the tax on the relieved profit need not be funded from taxed private assets.
  • The application can be withdrawn wholly or partly until the income tax assessment for the NEXT assessment period becomes final (§ 34a(1) sentence 5 EStG). You can still change course a year later.
  • The amount subject to clawback is determined separately EACH YEAR for each business or partnership interest (§ 34a(3) sentence 3 EStG) — the balance is therefore officially documented, not merely internal.
  • A clawback also arises on a sale or cessation of the business within §§ 14, 16(1) and (3) and § 18(3) EStG (§ 34a(6) no. 1 EStG) — the deferral ends there at the latest.
  • The clawback amount is reduced by amounts withdrawn for inheritance or gift tax on the transfer of the business or partnership interest (§ 34a(4) sentence 3 EStG).
  • A transfer of an asset under § 6(5) sentences 1 to 3 EStG triggers a clawback on the conditions of subsection 4; on application the amount subject to clawback may instead be transferred to the other business (§ 34a(5) EStG).

Common mistakes

  • Mistaking the relief for a tax remission. It is a deferral: income tax on the clawback amount is 25 per cent (§ 34a(4) sentence 2 EStG).
  • Deducting trade tax when computing the undrawn profit. § 34a(2) sentence 1 EStG expressly ADDS it back.
  • Deducting withdrawals gross. What counts is the positive BALANCE of withdrawals and contributions for the financial year (§ 34a(2) sentence 1 EStG).
  • Applying as a partner with a small share. The application requires a share of more than 10 per cent or over 10 000 euros (§ 34a(1) sentence 4 EStG).
  • Making one application for all businesses and years. It must be made SEPARATELY for each business or partnership interest and each assessment period (§ 34a(1) sentence 2 EStG).
  • Claiming the relief alongside the allowance under § 16(4) or the relief under § 34(3) EStG. § 34a(1) sentence 1 EStG excludes that to that extent.
  • Hoping for lower advance instalments. The relief under § 34a is left out of account when instalments are set (§ 37(3) sentence 5 EStG).
  • Forgetting that ceasing the business triggers the clawback (§ 34a(6) no. 1 EStG) — anyone selling up within a few years defers the tax only briefly.

Frequently asked questions

What is the relieved tax rate?

28.25 per cent for assessment periods up to 2027, 27 per cent for the assessment periods 2028 and 2029, 26 per cent for 2030 and 2031, and 25 per cent for assessment periods from 2032 (§ 34a(1) sentence 1 EStG).

How is the undrawn profit computed?

It is the profit computed under § 4(1) sentence 1 or § 5 EStG, reduced by the positive balance of withdrawals and contributions for the financial year and increased by the trade tax of that year (§ 34a(2) sentence 1 EStG).

What does the later clawback cost me?

Where the positive balance of withdrawals and contributions for a financial year exceeds the profit computed, a clawback arises to the extent an amount subject to clawback was determined at the end of the previous year; income tax on the clawback amount is 25 per cent (§ 34a(4) sentences 1 and 2 EStG).

Can I withdraw the application?

Yes, wholly or partly, until the income tax assessment for the next assessment period becomes final; the assessment is then amended accordingly (§ 34a(1) sentence 5 EStG).

Does this apply to my share in a partnership?

Only above a threshold. For partnership interests the application can only be made where the share of the profit computed under § 4(1) sentence 1 or § 5 EStG exceeds 10 per cent or exceeds 10 000 euros (§ 34a(1) sentence 4 EStG).

Will my advance instalments fall as a result?

No. In measuring advance instalments the relief under § 34a is expressly left out of account (§ 37(3) sentence 5 EStG).

Go further

Compute the related amounts

Understand this form: the related course

Related forms

Official sources

Read in German

Guide and document provided for information purposes only; they do not constitute personalised legal or tax advice. Check the recipient organisation's requirements and consult a professional if needed.