Fees paid by a tour operator to hoteliers for the provision of hotel rooms are not subject to the trade tax add-back. This was decided by the BFH in its judgment of 25 July 2019 – III R 22/16 regarding § 8 No. 1 lit. d and e of the German Trade Tax Act (Gewerbesteuergesetz).
Under these provisions, for trade tax purposes, rental and lease payments that previously reduced profit are partially added back to the profit determined under the rules of income tax or corporate income tax law, provided that the assets in question would be attributable to the fixed assets of the taxpayer's business.
The plaintiff operates as a tour operator in the legal form of a GmbH and organises package tours. For this purpose, it concluded contracts with other service providers in Germany and elsewhere in Europe regarding typical travel pre-services, in particular accommodation, passenger transport, catering, supervision and activities at the destination.
In its trade tax return for 2008, the plaintiff did make add-backs for rental and lease payments it had made, but only with respect to the business premises it had rented. The fees paid to the hoteliers were not taken into account in the add-backs.
Following a tax audit, the tax office took the view that the plaintiff did not purchase an overall hotel service, but rather that a portion of the fee paid to the hoteliers related to the "renting" of hotel rooms. Accordingly, it increased the trade income by the statutorily prescribed portion of these rental payments. The fiscal court followed this view.
The BFH, however, considered the plaintiff's appeal to be well-founded. The add-back requires, in addition to the existence of a rental or lease agreement, that the rented or leased assets would, on a hypothetical view, constitute fixed assets of the taxpayer if they were owned by it. The BFH denied the latter, since in the case of only a short-term provision of the hotel rooms, only a correspondingly short-term ownership position of the plaintiff was to be assumed. For the allocation of assets to fixed or current assets, the specific business purpose of the company must be taken into account and – as far as possible – the operational circumstances of the taxpayer must be used as the basis.
In this respect, it is decisive that the business model of a tour operator such as the plaintiff typically does not require long-term use of the assets provided by the hoteliers. Rather, the only temporary use of the assets serves the tour operator's need to be able to continuously adapt to changing market requirements, such as altered customer preferences or changed circumstances at the travel destination.
Since the fiscal court had so far only ruled on individual issues by way of an interim judgment, the case was referred back to the fiscal court.
Frequently asked questions
Frequently asked questions
Are payments by tour operators to hoteliers subject to trade tax add-back?
No. In its ruling of 25 July 2019 (III R 22/16), the BFH decided that payments made by a tour operator for the use of hotel rooms are not subject to add-back under § 8 No. 1 lit. d and e GewStG. Under a hypothetical ownership assessment, the hotel rooms would not qualify as fixed assets of the tour operator.
What conditions must be met for an add-back of rental and lease payments under § 8 No. 1 GewStG?
A rental or lease agreement must exist, and the rented or leased assets must be attributable to the taxpayer's fixed assets on a hypothetical basis, i.e. if they were owned by the taxpayer. If this hypothetical classification as fixed assets does not apply, the add-back is not made.
Why are hotel rooms not attributed to the deemed fixed assets of a tour operator?
A tour operator's business model typically does not require long-term use of hotel rooms. The short-term nature of the transfer results in only a short-term deemed ownership position, so the assets would be classified as current assets rather than fixed assets. Tour operators must be able to respond flexibly to market changes and customer preferences.
How is the distinction between fixed and current assets made for trade tax add-backs?
The decisive factor is the specific business purpose of the company. The operational circumstances of the taxpayer must be considered as closely as possible. Assets that are used only for a short period and serve ongoing business operations typically qualify as current assets.
What is the practical significance of the BFH ruling for tour operators?
Tour operators do not have to include payments made to hoteliers for the provision of hotel rooms in the trade tax add-back. This results in a lower trade tax burden. The ruling provides legal certainty regarding typical travel-related advance services such as overnight stays.