Germany: Expenses for rental of trade fair stand not subject to trade tax (federal tax court decision)

Expenses incurred by a manufacturing company for the rental of a trade fair stand were not subject to trade tax.

Expenses not subject to trade tax (federal tax court decision)

The German Federal Tax Court (BFH) held (III R 35/21) that the expenses incurred by a manufacturing company for the rental of a trade fair stand were not subject to trade tax.


Corporations that maintain a permanent establishment (PE) in Germany are subject not only to corporate income tax but also to trade tax, which is calculated based on trade income. Trade income is the profit from business operations determined in accordance with the German Corporate Income Tax Act (KStG), increased or reduced by additions or reductions in accordance with the German Trade Tax Act (GewStG). For example, rental expenses for the use of movable and immovable fixed assets owned by another party are to be added to the trade income.

Federal Tax Court decision

The court found that the rented trade fair stands (possibly movable assets) and trade fair stand areas (immovable assets) could not be allocated to the taxable assets of the taxpayer because they were not sufficiently permanent or economically significant to the taxpayer’s profitability. The taxpayer participated in the trade fairs on a total of only 10 days in the relevant tax year. In addition, the taxpayer was primarily a manufacturing company and not a classic sales company. The trade fair stands thus had minor economic significance, since they were not used as a means of production. In addition, the taxpayer could have meaningfully carried out its sales activities (its secondary business purpose) without participating in the trade fairs.

Read an April 2023 report [PDF 367 KB] prepared by the KPMG member firm in Germany



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