Germany: Expenses for rental of moveable and immoveable assets may be subject to trade tax (Federal Tax Court decision)
A Federal Tax Court decision concerning expenses for rental of moveable and immoveable assets
Expenses for rental of moveable and immoveable assets may be subject to trade tax
The German Federal Tax Court (BFH) held (III R 22/20) that expenses incurred by an event manager for the rental of movable assets (equipment) and immovable assets (in particular locations) for its customers may be subject to trade tax to the extent the event manager held those assets for a longer period of time, or repeatedly held similar assets for a short period of time, in order to be able to repeatedly organize new events with such assets.
Background
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.
Read a June 2023 report [PDF 993 KB] prepared by the KPMG member firm in Germany
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.