Trade tax add-back of maintenance fees in the course of leasing

The Regional Tax Court of Lower Saxony decided that maintenance fees incurred under leasing agreements must also be added back to the income subject to trade income tax.

Background

Under Section 8 No. 1 (d) of the Trade Tax Act (TTA), one-quarter of the total of one-fifth of the rent paid for the use of movable fixed assets in the ownership of another (including lease instalments) must be added back to the profit from trading operations.

In the years 2011 and 2012, the plaintiff (a GmbH) had leased utility vehicles to third parties, some of which it had leased itself. According to the lease agreements, the plaintiff had to bear the "maintenance fees" for the vehicles leased by him. Following a tax audit, the tax office added back part of the cost for maintenance to the trading profit subject to trade income tax and pursuant to Section 8 No. 1 letter d TTA.

Decision

The Regional Tax Court of Lower Saxony turned down the appeal.

The fact that in Sec. 8 No. 1 letter d sent. 1 TTA the legislator expressly treated leasing installments the same way as rent and leasehold strongly suggests to assume likewise in the case of ancillary services in the context of rental or lease agreements (in a strict interpretation of the law).

In case of a rental contract and according to civil law Section 535 (1) sentence 2 German Civil Code (BGB)  the landlord/owner is the one to bear the maintenance costs for the rented property. According to Section 581 (2) Civil Code, this provision applies analogous (“mutatis mutandis”) to leases, so that the lessor must bear the maintenance costs. In the case such cost is passed on to the tenant or lessee, this represents an ancillary service of the tenant or lessee in addition to the basic rental payment.

The above criteria should therefore also apply to leasing, which is not specifically regulated by law. In the opinion of the court, the differences under civil law between rent and leasing were not sufficient to warrant a different conclusion in the case at hand.

The trade tax add-back is even more justified here because the plaintiff, as lessee, was not the economic owner of the leased assets after all.

Notes:

According to a final ruling by the Regional Tax Court of Munich, which decided likewise, the term "leasing rates" in the context of the trade tax add-back must be understood in an economic sense. Which components (if at all) of the remuneration referred to as ancillary costs are part of the leasing rates and thus be added back is to be determined while obeying the concept of an " equitable and fair burden sharing as typified by law " for rental and lease agreements.

In a ruling published in August 2018 (case: III R 35/15), the Supreme Tax Court has not raised any doubts as to the constitutionality of the add-back provisions in Sec. 8 No. 1 letters d, e and f of the TTA. Nevertheless, a constitutional complaint has been filed against the ruling (currently pending at the Federal Constitutional Court (case ref.: 1 BvR 2150/18).

Source:

Regional Tax Court of Lower Saxony, decision of 15 June 2021 (ref. 6 K 10176/18); the case is currently pending before the Supreme Tax Court (case ref. III R 33/21).

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