No extended reduction if the entire property is sold during the tax period

February 13, 2025

In its ruling of 17.10.2024 (III R 1/23), the BFH confirmed its view that the sale of the entire property may only take place at the end of 31 December of a year (at midnight). The transfer of the property with effect “at the beginning of 31 December” already means that the corporation was not exclusively active in the management of real estate. The extended reduction under section 9(1) sentence 2 of the Gewerbesteuergesetz (GewStG – German Trade Tax Act) is therefore excluded.

The judgement of the BFH shows once again how strictly the BFH interprets temporal exclusivity. A single day in the assessment period on which the company was not active in property management is sufficient for a refusal. As a result, property transfer agreements must be carefully drafted to ensure that the transfer only takes place “at the end of 31 December”.