A real-estate GmbH typically pays 30% total tax on rental income: 15% corporation tax plus 15% trade tax (varies by municipality). With the extended trade tax reduction, that burden drops to 15% — cut in half. Provided the conditions are met.
What the provision covers
§ 9 Nr. 1 Satz 2 GewStG (German Trade Tax Act) reduces trade income by the portion attributable to the management and use of the company's own real property. The result: the qualifying portion attracts no trade tax at all. In effect, only corporation tax (15%) plus the solidarity surcharge remains.
For a real-estate GmbH with an annual surplus of €1 million from letting, that means:
- Without the reduction: approx. €300,000 in tax
- With the reduction: approx. €158,250 in tax
- Savings: €141,750 per year
The conditions in detail
1. Exclusive management and use of the company's own real property
The GmbH may only manage and use real property. Even a minor additional activity can forfeit the reduction — this is the most commonly overlooked trap.
2. Permitted ancillary activities
Only narrowly defined ancillary activities are permitted:
- Management and use of capital assets
- Construction and sale of the company's own single-family homes/condominiums
- Supervision of residential housing projects
3. Disqualifying activities
The following rules out the extended reduction:
- Supplying electricity from photovoltaic systems above the 10% threshold of § 9 Nr. 1 Satz 3 Buchst. b GewStG, or to end consumers who are not tenants (disqualifying!)
- Co-letting of operating equipment (Betriebsvorrichtungen)
- Operating a hotel or guesthouse
- Catering, food service and other operational services
- Holding an interest in a deemed-commercial partnership (gewerblich geprägte Mitunternehmerschaft)
A real-estate GmbH with 50 apartments installs an 80 kWp photovoltaic system on one of its roofs and supplies the electricity to its tenants. Until 2020, this would have forfeited the entire extended reduction. Since the 2021 assessment period, § 9 Nr. 1 Satz 3 Buchst. b GewStG saves the day: income from supplying electricity from renewable sources (and from EV charging stations) is harmless, provided it does not exceed 10% of the income from letting the building. But be careful: the electricity may only be supplied to the company's own tenants or fed into the grid — supplying any other end consumers remains disqualifying. The electricity income itself also remains subject to trade tax, and if the 10% threshold is exceeded, the reduction is lost for the entire rental result. The threshold must therefore be monitored continuously; for larger systems, spinning the operation off into a separate subsidiary GmbH remains the safe route.
Structuring options
Pure holding structure
A real-estate holding GmbH holds several property GmbHs, each engaged exclusively in property management. This keeps the reduction available at every level.
PropCo/OpCo split
The owner GmbH (PropCo) lets to an operating GmbH (OpCo). The PropCo enjoys the reduction; the OpCo carries the operational risk. The classic structure for hotels, care homes and logistics properties.
Vorratsgesellschaften (shelf companies) for new properties
Rather than overloading the existing portfolio, new investments can be acquired through Vorratsgesellschaften. The reduction is preserved in isolation for each subsidiary.
De minimis threshold
Case law has developed a de minimis threshold: ancillary activities below 5% of revenue are harmless if they are functionally necessary (e.g. waste disposal included in the lease). This threshold is, however, to be construed narrowly — when in doubt, have TABAK review it.
Documentation requirements
The reduction is claimed in the trade tax return. Key point: clean separation of income streams — no mixing of qualifying and non-qualifying activities. In tax audits, the reduction is a regular focus area.
More than 20 years advising entrepreneurs, investors and family businesses. Reserved tax services are provided by our partner tax firm, TABAK Steuerberatung.
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