Expenses for accommodation rented for a short period - Trade tax add-back?
The Federal Fiscal Court (Bundesfinanzhof,BFH) once again had to address the issue of whether the expenses for employee accommodation rented for a short period can be subject to trade tax add-backs. This problem is relevant primarily for firms operating interregionally that rent accommodation for employees in alternating work locations and in the tourism sector in the case of so-called hotel sourcing.
For trade tax purposes, 12.5% of the rental expenses that are deducted as business costs are generally added back to the commercial income (1/4 of 50 %, Section 8 no. 1(e) of the German Trade Tax Act) - provided that all the add-back elements amount to more than €200,000. The reasoning behind this is that the rent includes a rental payment for notional fixed assets if the rented assets were owned by the company. The trade tax treatment should ultimately be irrespective of whether a company owns its own properties or rents them.
In three court rulings, the BFH has now fleshed out the concept of “notional fixed assets”.
In case 1, a personnel services agency operating interregionally rented rooms in hotels and guest houses for short periods for its employees according to their work locations.
In case 2, a company operating throughout Germany on project-related works on drainage systems booked its employees into hotels or holiday homes, in each case for short periods, at the alternating work locations.
In case 3, a conference and event organiser rented, on its own behalf, hotel accommodation and function rooms to re-let.
In all three case, after tax audits, the tax authorities wanted to add back the rental expenses to the commercial income. Legal action was taken against the rejected appeals and the tax courts ruled in favour of the claimants. The expenses should not have been allowed to be added back. However, the tax offices appealed and this resulted in the tax court ruling decisions being overturned. In identical rulings of 15.1.2026 (case reference: III R 3/23, case reference: III R 39/22 and case reference: III R 28/24), the BFH stated in its headnotes that an add-back for “notional fixed assets” will depend on whether the rented asset, according to its operational function within the company, is subjectively and objectively intended to be used for business operations on a permanent basis. Here, it is not necessary for the rented assets to directly or indirectly serve a purpose of the company. In this respect, a decision must always be made on a case-by-case basis. Consequently, rent for making hotel accommodation available cannot thus generally be excluded from being added back. If properties are repeatedly rented for short periods - in this case, hotel accommodation and holiday homes as employee accommodation - then an add-back could (only) be considered if, given the specific operational circumstances, such properties must be kept available for business use at all times and, over and over, it is always the same accommodation, or the properties rented for only short periods are interchangeable with one another while also taking their location into account.
