BFH provides clarity: No tax without use!
Background: Company real estate and private use – when does it get expensive?
If a corporation – such as a GmbH – owns assets, such as a fancy vacation home or a company car, the tax office pricks up its ears: do shareholders use these things privately without paying for them? If so, this could be a so-called hidden profit distribution (vGA). This means that the private benefit is treated as a “hidden profit” – and must be taxed.
But what if the property is not used at all, but only the possibility of using it exists? This is exactly what the Federal Fiscal Court (BFH) took a closer look at in a recent ruling (dated 1.10.2024, ref. VIII R 4/21).
The case: Spanish vacation home and the dispute with the tax office
A married couple each held half of the shares in two Spanish companies that jointly owned a vacation home in Spain. The family lived there until 2007 – they paid monthly rent to their companies. The family then moved to Germany and stopped paying rent. It remains unclear whether they continued to use the vacation home after that.
The tax office nevertheless added a rent of € 42,000 per year as a hidden benefit for the years 2010 to 2012. The reasoning: The family could have used the house at any time – and this possibility alone was already a pecuniary advantage.
The BFH ruling: No use – no tax!
The BFH clearly contradicted this view:
- The mere possibility of using something is not sufficient to assume a hidden profit distribution.
- The decisive factor is whether the property is actually used privately or whether the company deliberately leaves it to the owner.
The court clarified: A vGA only exists if the shareholder actually uses the property or has been granted a right of use that he/she makes use of free of charge or at a reduced price.
However, as it was unclear in the specific case whether the couple had used the house at all after the move, the BFH sent the case back to the tax court. It must now examine the matter: Was there any use or not?
Simply explained – an example:
Imagine you are a shareholder in a limited company that owns a vacation home on the Baltic Sea. You theoretically have the key, but you never use the house – it’s empty. The tax office might think: “He or she could go on vacation at any time!” – and accuse you of having an advantage. But: as long as you don’t actually use the house, you don’t have to pay any tax. It only becomes critical when you move in or visit it regularly.
Why is the judgment important?
Until now, the tax office has often been quick to regard the mere availability of company assets as an advantage. The BFH has put the brakes on this:
- It’s the actual use that counts – not just the possibility.
- This protects shareholders who do not use business assets privately.
Recommendation for action:
Do you use company assets privately? Then regulate this properly via contracts and document payments. Are you not using it? Then document this too – e.g. with records that the property was vacant. Especially in the case of foreign properties: make sure you are legally protected to avoid disputes with the tax office.
Avoid unnecessary discussions with the tax office and secure your tax advantage:
