Hotels and car parks as non-preferential administrative assets for gift and inheritance tax purposes?

In principle, the transfer of business assets may be exempt from gift or inheritance tax under certain conditions. However, this does not apply to certain assets of the so-called administrative assets. This also includes land transferred to third parties for use (see Section 13b (4) ErbStG with the statutory catalogue of administrative assets). In the opinion of the Federal Fiscal Court (BFH), commercial property transfers (such as car park operations or hotels) should be classified as tax-damaging administrative assets under income tax law - in some cases contrary to previous practice.

The facts of the case

The plaintiff acquired a sole proprietorship from his father as sole heir. The sole proprietorship comprised a property with a multi-storey car park and a petrol station.

The taxpayer did not declare any administrative assets in the declaration to determine the value of the business assets for inheritance tax purposes. The tax office, on the other hand, determined administrative assets in the amount of the entire value of the property developed with the multi-storey car park and petrol station.

The BFH had to decide whether the property developed with the multi-storey car park and petrol station constituted administrative assets within the meaning of Section 13b para. § Section 13b para. 4 no. 1 sentence 1 ErbStG.

Decision of the BFH

In its ruling of 28.02.2024 - II R 27/21, the BFH ruled in favour of the tax office that the property developed with the multi-storey car park and petrol station is a tax-damaging administrative asset.

The car park operation indisputably transfers parts of the property to third parties for use. Furthermore, for gift and inheritance tax purposes, it does not matter whether a commercial service bundle is added to the transfer of use. Supplementary commercial services as part of the car park operation, such as entry and exit control or a payment service, are irrelevant. Although the short-term provision of parking space is to be classified as commercial under income tax law due to the frequent change of tenants, this is irrelevant under inheritance tax law.

In the grounds for the judgement, the Second Senate of the BFH states that accommodation businesses such as hotels, guesthouses or campsites are also included in tax-damaging administrative assets, although the activity is to be classified as an original commercial activity for income tax purposes. The BFH does not see this as unconstitutional unequal treatment (compared to other exempt property transfers such as so-called housing companies).

(Still) divergent view of the tax authorities

According to deviating instructions from the tax authorities in the inheritance tax guidelines (see R E 13b.13 sentence 3 ErbStR), the transfer of parts of a property does not lead to administrative assets if, in addition to the transfer of parts of the property, other commercial services are offered and utilised in a uniform manner and the activity as a whole is to be classified as an original commercial activity from an income tax perspective (e.g. in the case of accommodation businesses such as hotels, guesthouses or campsites). A possible amendment to R E 13b.13 sentence 3 ErbStR by the tax authorities remains to be seen.

Due to the diverging legal opinions between the tax authorities and the BFH, there is considerable legal uncertainty for affected taxpayers, for example in the context of succession planning. They should prepare for the changed framework conditions in good time and not wait until the legislation has created clarity.

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