Pure rental activities are – like the capital investment – to be assigned to the private sphere of life of a taxpayer (e.g. via § 21 EStG). However, if the taxpayer leases the asset to a limited liability company which he controls himself or jointly with others, a split-up of the business can occur. It is a legal institution not explicitly regulated by the Income Tax Act and concretized by BFH jurisprudence and administration. If a business split is unplanned and uncoordinated, the tax consequences can be serious – especially if one of the prerequisites is eliminated.
So let’s take a look at how a profit tax division arises, how it affects taxation and what possibilities there are for (tax-neutral) dissolution!
The BFH jurisprudence issued for the income tax division has long since found its way into binding administrative instructions. In the Income Tax Manual (EStH) we find all necessary legal bases with the guidelines and instructions on § 15 EStG (R 15 and H 15 EStR). On the basis of these basic principles, an operating split can also be avoided from the outset.
In principle, pure asset management is not a commercial activity (R 15.7 paragraph 1 sentence 1 and 2 EStR). However, the transfer of use (for example rental of real estate) becomes a business operation if the conditions for a profit tax split are met. This presupposes the existence of both factual and personnel links (H 15.7 paragraph 4, keyword “general”, EStH):
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.