Recently, the „family co-operative“ model has become increasingly popular. The promises of the providers sound tempting: private living expenses - from weekly shopping to swimming pools - are to be financed via the cooperative and can be claimed as business expenses for tax purposes. The Bavarian State Tax Office (LfSt) has now once again issued a clear rejection of this arrangement in a recent ruling (dated 17 February 2026).
The model: The co-operative as a „private purse“?
So-called family cooperatives are registered cooperatives (eG) whose members are exclusively or predominantly members of a family. The concept of many advisors is based on an extensive interpretation of the promotional purpose according to § 1 GenG.
The argumentation: As the cooperative is supposed to promote the „social and cultural interests“ of its members, expenses for private living - such as holiday trips, restaurant visits, fitness courses or even the construction of a private sauna - are necessary expenses to fulfil the purpose of the articles of association. This would result in a full deduction of business expenses for corporation tax purposes and an input tax deduction for VAT purposes.
The clear rejection of the tax authorities
In its current ruling (LfSt Bayern of 17 February 2026 - S 7300.2.1-228/12 St33), which replaces a previous ruling from 2025, the tax authorities clarify that this tax treatment is unlawful.
1. corporation tax: hidden profit distribution (vGA)
The LfSt emphasises that the general principles of hidden profit distribution also apply without restriction to cooperatives.
- Arm's length comparisonA proper and conscientious manager would never finance private holidays or pet food for an outsider.
- Lack of business operationsThe mere granting of financial benefits to members is not a „joint business operation“ within the meaning of the Cooperatives Act.
- ConsequenceThe expenses may not reduce the taxable profit. They will be qualified as a profit transfer, which leads to an increase in profit at the level of the cooperative and to taxable income from capital assets at the level of the members.
2. sales tax: no input tax deduction
The tax authorities also draw a clear line in terms of VAT. Input tax deduction requires that services are purchased for the company - i.e. for the provision of paid services.
- Expenses for members' private consumption are part of the non-business area.
- The definition of the object of the company in the articles of association is irrelevant here.
- ConsequenceInput tax deduction from „private“ invoices (e.g. supermarket purchases, tradesman services at a private home) is excluded.
Focus on current case law
The restrictive view of the tax authorities is supported by the first judgements of the tax courts (e.g. Berlin-Brandenburg tax court of 15 January 2025 and Munich tax court of 24 February 2025). The corresponding proceedings are currently pending at the Federal Fiscal Court (BFH) under case numbers I R 31/25 and I R 32/25. It is to be expected that the BFH will confirm the line taken by the tax authorities.
Conclusion and recommendation for action
The family cooperative is not an instrument for tax-privileged financing of private living expenses.
Taxpayers who use such models must expect intensive tax audits, substantial back tax payments and criminal tax proceedings. Taxpayers should consider the possibility of making a voluntary disclosure to avoid prosecution. Important: A voluntary disclosure only has the effect of exempting from prosecution if the offence has not yet been discovered. As soon as an audit order is issued or investigations are initiated, the „window of impunity“ is closed. Your TAXGATE Team supports wealthy private individuals and family businesses with complex tax issues and represents their interests vis-à-vis the tax authorities.
