The trade tax add-back of rental expenses continues to be a complex area. The Federal Fiscal Court (BFH) recently specified its rulings concerning the add-back of expenses for temporarily rented employee accommodation, hotel rooms, and event spaces.
Lawyer Erik Spielmann, Managing Director of the auditing and tax consulting firm Westprüfung, a member of the international HLB network, emphasises that the BFH has made it clear that the rental period or formal criteria are not primarily decisive. Instead, the focus is on the actual operational circumstances and the assessment of whether a rental corresponds to a permanent operational need.
Fictitious fixed assets and actual use
A trade tax add-back of rental and leasing expenses according to § 8 No. 1 lit. d and e of the Trade Tax Act (GewStG) requires that the rented assets would be classified as fictitious fixed assets if they were owned by the company. The actual use within the company is crucial here. It is sufficient if, according to the specific operational conditions, the accommodation is intended to serve the business operations permanently. Its necessity for immediate service provision or its indispensability are not relevant in this context.
The BFH attaches particular importance to local use. If accommodation is repeatedly required at the same location or within a specific catchment area, and the used properties are interchangeable, this can indicate a permanent operational need and thus fictitious fixed assets. Hotel rooms are not principally exempt from trade tax add-back, although the explanatory memorandum to the law usually assumes an exclusion for short-term hotel use. The circumstances of the individual case remain decisive here.
An add-back is particularly to be considered if accommodation must be permanently maintained due to a permanent operational need. Project-related use at changing locations, as is characteristic for tour operators, for example, argues against an add-back.
Importance of documentation and recommendations
Mr. Spielmann stresses the importance of verifiable documentation of rental practices. The question of where and how regularly accommodation is used, and whether it functions in the business as a permanently needed resource or as an interchangeable component of a product package, can be crucial for tax assessment. Companies are advised, in light of the current jurisprudence, to review existing processes and documentation.
- —Verifiable recording of the locations of rented accommodation or premises.
- —Analysis of recurring needs at identical or comparable locations.
- —Documentation of the connection of rentals with specific projects or contracts.
- —Clarification as to whether the use is due to a permanent operational need or merely individual cases of application.
The BFH decisions mean neither a general all-clear nor an automatic add-back for short-term rentals. The actual operational circumstances, the business purpose, and the question of whether the use economically corresponds to permanently maintaining accommodation or premises remain decisive. Careful documentation and a case-by-case tax analysis thus gain further importance for companies.
