The erweiterte Kürzung takes a property company's letting income out of the trade-tax base — but only if the company does nothing besides managing and using its own real estate, within narrow statutory allowances. It is all or nothing: one harmful activity, such as co-letting a supermarket's refrigeration plant, can cost the relief for the whole year, and at a 400% multiplier trade tax then takes 14% of trade income.
What it is
A GmbH is subject to trade tax by its legal form (§ 2(2) GewStG). On application, however, a company may deduct the part of its trade income attributable to managing and using its own real estate. The condition is that it exclusively manages and uses its own real estate — or, besides it, its own capital assets (§ 9 no. 1 sentence 2 GewStG). Two side activities are tolerated, each measured against the year's receipts from letting the property, with the property profit determined separately:
- supplying electricity from renewable-energy plants (to end consumers only if they are the company's tenants) or from charging stations for electric vehicles or e-bikes: up to 20% (sentence 3 lit. b);
- other direct contracts with tenants: up to 5% (sentence 3 lit. c).
The relief is excluded where the property serves, wholly or in part, a shareholder's business (sentence 5 no. 1). The Federal Fiscal Court adds two rules:
- Co-letting operating equipment (Betriebsvorrichtungen), which is not real estate for valuation purposes, excludes the relief. The exception is firmly attached equipment that is a necessary part of sensible property management, within the quantitative limits of an ancillary activity, as the court accepted for a goods lift. A breach of exclusivity costs the relief in full (BFH, 25 September 2025, IV R 31/23).
- The conditions must hold throughout the assessment period: a company that sold its entire property with effect from the start of 31 December lost the relief for that year (BFH, 17 October 2024, III R 1/23).
Why it matters to investors
Without the relief, trade tax at a 400% multiplier takes 14% of trade income, and corporate and trade tax together take roughly 25–33% of a GmbH's profit (Part 9). In Part 11's example, the equity-funded GmbH would pay about €25,000 more a year at that multiplier without it.
Supermarket leases carry specific traps: refrigeration plant, ramps or shelving let with the building; solar power and charging sold beyond the 20% allowance (Part 3); services to the tenant beyond 5%. Whether a lease qualifies is for the tax adviser to confirm before signing, not after the first assessment (Part 9).
What to check
• An inventory of everything let with the building, separating real estate from operating equipment.
• The company's receipts from electricity, charging and tenant services, against the 20% and 5% allowances.
• Whether a shareholder's business uses any part of the property.
• For an exit, the transfer date of any sale, planned with the tax adviser.
Sources: GewStG §§ 2(2), 9 no. 1, 11(2), 36(4b); BFH, judgment of 25 September 2025, IV R 31/23; BFH, judgment of 17 October 2024, III R 1/23; Gordon Real Estate Group, "German Prime Retail", Parts 3, 9 and 11. Legal position as of 10 October 2026.
Photo: Annie Spratt / Unsplash
This entry is general information and not legal or tax advice.