On 21 February 2018, the BFH published an interesting ruling on housing companies with inheritance tax privileges (BFH of 24 October 2017, II R 44/15).

Housing companies whose letting requires a commercial business operation are favoured for inheritance tax purposes.

On a positive note, the BFH emphasised the Rigid 300-object limit of the tax authorities and makes it clear that the required economic business operation does not depend on the number of flats.

It should be noted, however, that the Federal Fiscal Court has ruled that, in addition to letting in the context of a commercial business, the privileged status for inheritance tax purposes is based on the following factors Additional services that exceed the usual level for long-term lettings:

  • Not sufficient are therefore, for example, the following activities: Searching for suitable tenants by placing adverts on portals, drawing up the tenancy agreement, handing over the flat, collecting rent payments, contacting tenants during the current tenancy, drawing up utility bills, keeping the communal areas clean, designing and maintaining the outdoor facilities, the fulfilment of the obligation to clear and grit, the repair and maintenance of the flats, the commissioning of the relevant tradesmen, their supervision and control and their payment, the supply of electricity, heating and water and the contact and processing of orders with the relevant suppliers, including the control and payment of invoices.
  • On the other hand, a privileged commercial letting activity is to be assumed if the letting of rooms does not involve customary Special services that go beyond the services provided within the scope of mere flat management (see above). These include, for example, taking over the cleaning of the rented flats, guarding the building, furnishing the rooms, providing/changing bed linen, providing a lounge with a television, sick room, appointing a caretaker).

From the perspective of many housing companies, the development of case law is welcome, in particular because the rigid 300-property limit has been rejected. It can be assumed that the tax authorities will adapt the inheritance tax guidelines to the BFH case law at this point.

Housing companies should check whether the provision of sufficient special services (as required by the BFH) can be assumed in a specific case. Against the background of this legal development, it may also make sense to expand the business of the respective housing companies to a certain extent.

Yours TAXGATE team will be happy to answer your questions at any time.