Different treatment of trade tax exemption for asset management companies in Germany

With regard to trade tax exemptions for asset management companies, there are two possible types. 1:

1. in the course of the “simple” property reduction pursuant to section 9 no. 1 sentence 1 GewStG, a double burden with real taxes – trade tax and property tax – is to be avoided at the level of the company claiming the reduction. In addition, the exercise of commercial activities on one’s own land and on land owned by others is to be placed on an approximately equal footing. For the purposes of trade tax, 1.2 per cent of the standard value of the real property belonging to the business assets of the entrepreneur and not exempt from real property tax is deducted from the trade income.

2. the extended property reduction within the meaning of section 9 no. 1 sentence 2 et seq. of the German Trade Tax Act (GewStG) is essentially intended to serve this purpose. GewStG is essentially intended to avoid the burden of trade tax depending on the legal form and to place it on an equal footing with the pure rental activities of non-commercial legal entities. Accordingly, pure rental income is in fact exempted from the trade tax liability. 


In principle, the “simple” real estate reduction is open to all legal entities owning real estate. In contrast, the extended property reduction is subject to much stricter conditions

A purely asset-managing partnership is not subject to trade tax, so that the question of a possible trade tax reduction is of secondary importance here.

If a GmbH participates in a partnership without its own business operations, the real estate of the partnership is attributed as the GmbH’s own real estate. Accordingly, it must be examined whether the extended property reduction applies at the level of the GmbH and thus a trade tax burden is avoided. Of course, the other requirements for the extended property reduction must also be met and must be examined in each individual case.

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