The letting of a shopping centre is not subject to trade tax, as the Bundesfinanzhof (BFH) ruled in its decision of 14 July 2016 (IV R 34/13). Rather, such letting still falls within the scope of private asset management. For a commercial enterprise to be assumed, it is not sufficient that, in addition to the mere letting of the retail spaces, the lessor provides the infrastructure required for the operation of the shopping centre and carries out advertising and sales-promotion measures for the entire shopping centre.
In the case decided, a letting company had leased a shopping centre with a sales area of around 30,000 sqm to approximately 40 tenants, such as retailers offering goods and services. The letting company had required the tenants to conclude contracts with two further companies so that these companies would handle the ongoing operation, maintenance, cleaning and security of the entire shopping centre, including the car park, as well as the cleaning of the existing sanitary and staff facilities. The tenants were obliged vis-à-vis the letting company to establish an advertising company financed by themselves. This company paid a centre manager to carry out advertising measures for the shopping centre. The tax office and the tax court took the view that, due to the multitude of such services, the letting of the shopping centre constituted a commercial enterprise.
The BFH, by contrast, ruled in favour of the lessor and denied the existence of a commercial enterprise. According to its ruling, the area of private asset management is not yet left when a shopping centre is let and accompanying services are provided to the tenants by the lessor itself or, at the lessor's instigation, by third parties. The decisive factor for the BFH was that these services relate to the infrastructure required for letting a shopping centre. Services such as cleaning, security and the provision of sanitary and staff facilities are customary services in the letting of a shopping centre. Advertising and sales-promotion measures do constitute additional services beyond letting. However, since the letting company thereby promotes the entire shopping centre, this advertising primarily serves the lessor's interests and therefore does not alter the fact that the letting performance defines the character of the overall exchange of services.
Source: BFH press release
Frequently asked questions
Frequently asked questions
Is the leasing of a shopping center subject to trade tax?
No. In its ruling of 14 July 2016 (IV R 34/13), the BFH held that the leasing of a shopping center is generally still classified as private asset management and is therefore not subject to trade tax. This also applies if the landlord provides additional infrastructure and advertising services.
Which additional services do not turn the rental of a shopping center into a commercial enterprise?
Customary services such as cleaning, security, maintenance, and the provision of sanitary and staff facilities form part of the necessary infrastructure of a shopping center and do not constitute a commercial enterprise. Even if the landlord has these services performed by third parties, the activity remains within private asset management.
Are advertising activities for a shopping center harmful to asset management status?
No, advertising and sales-promotion activities do not necessarily result in classification as a commercial enterprise. Since the advertising promotes the entire shopping center, it predominantly serves the landlord's interest. The leasing service therefore continues to define the overall exchange of services.
When does the leasing of a shopping center cease to qualify as private asset management?
The threshold to commercial activity is crossed when the additional services provided go beyond the infrastructure typical for a shopping center and begin to dominate the leasing activity. As long as the services merely cover the necessary infrastructure, the activity remains private asset management.
What is the practical significance of the BFH ruling IV R 34/13 for landlords?
Landlords of large commercial properties such as shopping centres can generally remain exempt from trade tax even when providing extensive ancillary services. The decision creates legal certainty in distinguishing between private asset management and commercial activity and is particularly relevant for real estate companies.