Master craftsman start-up bonus: Do you have to pay taxes on it?

Master craftsmen in North Rhine-Westphalia who want to start their own business can receive a grant of €7.500 through the Master Craftsmen's Start-up Bonus. This raises the question: Are taxes payable on this?

This article is part of the special feature GründerNavi – for founders and young companies

Master craftsmen and women in North Rhine-Westphalia who wish to become self-employed for the first time by starting a business, taking it over, or participating in an existing corporation can apply for the NRW Master Craftsmen Start-up Bonus. This is a state subsidy of €7.500.

The application is submitted to the relevant Chamber of Crafts and Trades and is approved by the State Trade Promotion Agency of the NRW Crafts LGH.

Sole proprietorship or corporation?

The subsidy must be granted under certain Requirements not be repaid, but how is it actually treated for tax purposes? The Münster Regional Finance Directorate has clarified this question: 

Grants that can be used to Establishment of a sole proprietorship received are related to a commercial activity. They represent income from this activity and are subject to tax. This means that the subsidy is recorded as business income and increases profits.

If you use the grant to start a new business or to buy shares in an existing one corporation, then the subsidy reduces the acquisition costs. If the shares are later sold again, the €7.500 master craftsman start-up bonus must be added back to the capital gain and taxed accordingly.

OFD Münster v. 02/21/2013 - S 2121 – 26 – St 12 – 33

Since 2016 there are two Changes for applicants, as the LG extension there:

- The start-up project must not have begun before the grant approval is issued. If the project is to be started between the application and the grant approval, the LGH may, upon request and after submission of a verifiable application, grant approval for the early commencement of the project.
- Only expenses incurred by the founder after the grant has been granted or after the approval of an early start to the measure without affecting funding can be recognized as eligible expenses. These expenses must amount to at least €15.000.