Landlords have the option to depreciate a rental property faster than the standard depreciation rate under the official depreciation tables if a shorter useful life can be conclusively demonstrated. This is typically done through a valuation report prepared by an independent expert. Below, we present a decision of the Münster Tax Court addressing such cases.
Legal Dispute: Shorter Depreciation Based on Expert Report
The plaintiffs were asset-managing GmbH & Co. KGs, both of which generated rental income from their properties. Specifically, the case concerned two buildings constructed in the 1920s and around 1950. At the time of the transfer of benefits and burdens, the remaining useful life pursuant to § 7 Abs. 4 Nr. 2 EStG was 40 and 50 years, respectively. The plaintiffs, however, took the view that the actual useful life (§ 7 Abs. 4 S. 2 EStG) was significantly shorter. For this reason, both commissioned an independent market value report from a third-party expert. The expert's valuation report confirmed the plaintiffs' position, contrary to the tax office's assessment.
Valuation Reports under the Real Estate Valuation Ordinance
The reports were prepared on the basis of the Real Estate Valuation Ordinance (ImmoWertV). According to BFH case law, this method of determining the asset value of a building under the ImmoWertV is not explicitly designed to determine the actual remaining useful life, but it may, in individual cases, provide a reliable basis for estimation. Accordingly, the Münster Tax Court ruled in favor of the asset-managing companies.
Appeal Not Admitted The Münster Tax Court denied the admission of an appeal, as the case involves individual decisions applying established case law.
Frequently asked questions
Frequently asked questions
Can a rental property be depreciated over a shorter period than the AfA table provides?
Yes. Under § 7 Abs. 4 Satz 2 EStG, a landlord may apply a shorter actual useful life than the standard 40 or 50 years. The prerequisite is that the shorter useful life is conclusively substantiated, typically by an expert appraisal from an independent surveyor.
Is an appraisal under ImmoWertV permissible for determining the remaining useful life?
According to BFH case law, the building cost valuation method under the Real Estate Valuation Ordinance (ImmoWertV) is not explicitly intended for determining the actual remaining useful life. However, it may serve as a suitable basis for estimation in individual cases and can be recognized by the tax court.
How did the Münster Tax Court rule on shorter depreciation periods for rental properties?
The Münster Tax Court ruled in favor of asset-managing GmbH & Co. KGs that claimed a shorter remaining useful life for buildings from the 1920s and 1950s than the statutory depreciation period of 40 or 50 years. The decision was based on independent market value appraisals prepared in accordance with the ImmoWertV (German Real Estate Valuation Ordinance), which confirmed the shorter useful life.
Was an appeal allowed against the decision of the FG Münster?
No, the FG Münster did not allow an appeal. The court reasoned that the rulings are individual case decisions in which only established case law is applied.
Which legal basis permits a shorter depreciation period for buildings?
Section 7 (4) sentence 2 EStG allows taxpayers to apply a shorter actual useful life instead of the flat-rate depreciation rates under Section 7 (4) Nos. 1 and 2 EStG. The burden of proof lies with the taxpayer, who typically meets this requirement by submitting an expert appraisal.