The asset management GmbH & Co. KG - Trade tax is looming
With reference to the relevant case law of the Federal Fiscal Court (Bundesfinanzhof, BFH), it has hitherto frequently been assumed that a GmbH & Co. KG [limited partnership with a limited liability company as a general partner] that is deemed to be of a commercial nature would not be subject to trade tax if it mainly engaged in asset management. Yet, on the basis of a recent ruling by a tax court, it may be necessary to put this approach into a much broader perspective.
The complaint of a partnership deemed to be of a commercial nature
In the case that reached the Münster tax court, a lawsuit was brought by a GmbH & Co. KG (abbreviated to K) that mainly engaged in the leasing and managing of its own property. Moreover, the company held an interest in a partnership that operated commercially and generated commercial income from this. The Komplementär-GmbH [general partner limited liability company], as the sole general partner, was authorised to manage the business and did not hold an interest in the company's assets. The conditions for a partnership deemed to be of a commercial nature, as defined in Section 15(3) no. 2 of the German Income Tax Act, had thus been fulfilled.
During the proceedings, K voiced the opinion that the principles developed by the BFH for the trade tax treatment of investment income likewise had to be applied in its case. According to this case law, income from the commercial investments of a partnership that otherwise engages in asset management would not necessarily lead to all the company’s income being subject to trade tax. K argued that the income from the commercial investments would therefore not “taint” the asset management activities and would consequently not result in an overall liability for trade tax.
The Münster tax court put the BFH case law into perspective …
In its ruling of 17.2.2026 (case reference: 15 K 1605/24 G), the Münster tax court did not accept the argument brought forward by K and instead the court confirmed the liability for trade tax. In its opinion, the crucial difference to the cases that had hitherto been decided by the BFH was that, irrespective of the investment income, the company was already considered to be a commercial enterprise. The classification as a trade or business was not based on the investment income, but rather on the commercial nature of the GmbH & Co. KG.
Moreover, the tax court judges emphasised that the company already operated a commercial enterprise by virtue of its structure under company law. Holding an interest in a partnership that operated commercially made no difference here. Rather, in the opinion of the court, it would not be compatible with the system if a company that is already of a commercial nature and thus subject to trade tax could cease to be subject to trade tax solely because of the addition of investment income. Consequently, the tax court has expressly limited the scope of the more recent BFH case law to situations where the classification as a trade or business results solely from investment income. By contrast, if classification as a trade or business already exists by virtue of the commercial nature, there should be no scope for the corresponding application of this case law.
Therefore, the more recent BFH case law (ruling from 5.9.2023, case reference: IV R 24/20) cannot be automatically transferred to all asset management real estate companies. Rather, according to the ruling by the Münster tax court, the structuring of the GmbH & Co. KG under company law should be considered as a separate point of reference for its liability for trade tax.
… by citing the impact on the extended deduction for property
In the opinion of the tax court, K was likewise not able to make use of the extended deduction for property under Section 9 no. 1 sentence 2 of the German Trade Tax Act. This was because the company leased office space to a partner that used these premises for its own business operations. The property thus served, at least in part, the business operations of a partner - which constitutes harmful use.
A reason to carry out reviews in the light of the appeal pending before the BFH
Owing to the fundamental importance of the issue, the Münster tax court granted leave to appeal; the ccase is now pending before the BFH under the reference IV R 5/26. Until there is a ruling by the highest court, existing property and participation structures should be critically reviewed. In particular, GmbH & Co. KGs that are deemed to be of a commercial nature cannot automatically assume that the BFH case law, which is favourable for taxpayers, will also be applicable in their cases.
