Costs for renting a trade fair stand are only added back for trade tax purposes if the stand qualifies as fixed assets of the company. Whether an asset belongs to fixed assets can be assessed by examining whether the item is intended to serve the business operations on a permanent basis (§ 247 Abs. 2 HGB).
Case at issue: Plaintiff excludes add-back of rental payments for trade fair stand
The plaintiff is a GmbH that does not engage in direct sales to its end customers; instead, the products are sold indirectly through an established dealer network. In the disputed years 2009 to 2011, the GmbH rented exhibition space and facilities to present its products to trade fair visitors. The costs for rent and exhibition of the products amounted to EUR 96,738 (2009), EUR 78,174 (2010) and EUR 105,264 (2011). The incurred expenses were claimed in the disputed years as deductible business expenses reducing profit. A trade tax add-back of the rental payments under § 8 Nr. 1 Buchst. e GewStG was not carried out.
Following an external audit at the plaintiff, the competent tax office concluded that an add-back of the expenses in the form of rental payments was in fact required. For this reason, the tax office rejected an objection against the amended trade tax assessment notices of the plaintiff.
Decision: BFH considers tax office's appeal unfounded
In the view of the BFH, the prior decision of the fiscal court (FG) was correct in finding that an add-back under § 8 Nr. 1 Buchst. e GewStG does not apply in this case.
Statutory regulation of § 8 Nr. 1 Buchst. e GewStG
Under § 8 Nr. 1 GewStG, one quarter of the sum of the following expenses is added back to the profit of a commercial enterprise. This includes, among others, § 8 Nr. 1 Buchst. e GewStG. Accordingly, half of the rental and lease payments (including leasing instalments) for the use of immovable fixed assets owned by another party is added back. A prerequisite for an add-back is that these amounts were previously claimed as deductible business expenses reducing profit. Overall, however, the add-backs under § 8 Nr. 1 Buchst. a-f GewStG may not exceed the amount of EUR 200,000.
In the present case, it must be clarified whether the trade fair stand can be regarded as a fixed asset of the GmbH. To resolve this question, § 247 Abs. 2 HGB referenced above must be examined.
No fictitious fixed assets of the GmbH
Since the trade fair stand cannot in fact be regarded as an asset of the GmbH, the assessment must of course be made under the fiction that the trade fair stand were owned by the GmbH.
The BFH and the FG each considered the operational circumstances in their decision regarding whether the trade fair stand belongs to fixed assets. It is important to note that no direct sales to the end consumer take place; rather, the products are sold indirectly through an established dealer network. The FG therefore held that participation in trade fairs would not be strictly necessary in order to sell the products. Instead, other advertising options would be available. Classification as fixed assets is particularly appropriate where similar goods are repeatedly rented for the business operations and thus serve continuous use.
Frequently asked questions
Frequently asked questions
When must rental costs for trade fair stands be added back for trade tax purposes?
An add-back under § 8 No. 1 lit. e GewStG only applies if the trade fair stand would notionally form part of the company's fixed assets. The decisive factor is whether the stand would be intended to serve the business operations on a lasting basis (§ 247 Abs. 2 HGB). If the stand is only rented occasionally and trade fair participation is not strictly necessary for distribution, no add-back applies.
How is a leased asset's classification as deemed fixed assets assessed?
Since the asset is not owned by the company, the assessment is made under the fiction that the company were the owner. The decisive factor is the actual operational use, in particular whether the asset permanently serves the business. Classification as fixed assets is especially likely where similar assets are repeatedly leased for ongoing use.
What role does the distribution channel play in assessing the add-back of trade fair booth rental costs?
The distribution channel is a key criterion. If sales are not made directly to end customers but indirectly through an established dealer network, trade fair participation is not strictly necessary for product sales. In this case, alternative advertising options are available, meaning the booth does not permanently serve the business operations and no add-back applies.
Which expenses are added back under Section 8 No. 1 lit. e GewStG?
Half of the rental and lease payments (including leasing installments) for the use of immovable fixed assets owned by a third party must be added back. A prerequisite is that the expenses were previously recognized as business expenses reducing profit. In total, one quarter of the sum of all add-back items under Section 8 No. 1 GewStG is added to trade income, taking into account the allowance of EUR 200,000.
When does an asset qualify as fixed assets under § 247 Abs. 2 HGB?
An asset is classified as fixed assets if it is intended to serve the business on a permanent basis. The decisive factor is its long-term purpose, not merely occasional or short-term use. Repeatedly renting similar items for ongoing use also indicates classification as fixed assets.