It is charged to trade tax in its own right, but allocates its remaining income to the partners for inclusion in their tax returns.
A partnership is a hybrid animal. As a business, it is subject to trade tax in its own right. As a partnership, however, it is not a legal entity and does not file a corporation or income tax return on its own account. Rather, it files returns of income allocated to the partners who then take up the amounts allocated into their own computations. These returns of partners' income include expenses incurred in connection with the partnership's activities but not charged to it, so the return formalities force awareness of these "outside items" on the local partnership management.
A foreign business with income or losses as a member of a German partnership is treated as though it had operated through a permanent establishment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.