A real estate GmbH typically pays 30% total tax on rental income: 15% corporate tax plus 15% trade tax (regionally variable). With the extended trade tax reduction, this burden decreases to 15% — a halving. If the conditions are met.
What the regulation stipulates
§ 9 No. 1 Sentence 2 GewStG reduces the trade income by the part attributable to the administration and use of one's own real estate. The result: No trade tax is levied on the reducible portion. No trade tax is due. Effectively, only corporate tax (15%) plus solidarity surcharge remains.
For a real estate GmbH with €1 million annual surplus from rental income, this amounts to:
- Without reduction: approximately €300,000 tax
- With reduction: approximately €158,250 tax
- Savings: €141,750 per year
The conditions in detail
1. Exclusive administration and use of one's own real estate
The GmbH may only manage and use real estate. Even a small different activity can jeopardize the reduction — this is the most overlooked trap.
2. Permissible ancillary activities
Only narrowly defined ancillary activities are permitted:
- Management and use of capital assets
- Construction and sale of one's own homes/apartments
- Supervision of residential buildings
3. Exclusion criteria
The following excludes the extended reduction:
- Electricity supply from photovoltaic systems exceeding the 10% threshold of § 9 No. 1 Sentence 3 Letter b GewStG or to end consumers who are not tenants (detrimental!)
- Subletting of operating facilities
- Operation of a hotel or guesthouse
- Catering, gastronomy, other operational services
- Participation in a commercially shaped partnership
A real estate GmbH with 50 apartments installs an 80 kWp PV system on a roof and supplies electricity to its tenants. Until 2020, this would have jeopardized the entire extended reduction. Since the assessment period of 2021, § 9 No. 1 Sentence 3 Letter b of the GewStG saves the situation: Income from the supply of electricity from renewable energies (as well as from charging stations for electric vehicles) is harmless as long as it does not exceed 10% of the income from the rental of the property. But caution: Electricity may only be supplied to its own tenants or to the grid — supplying other end consumers remains detrimental. The electricity revenues themselves remain subject to trade tax, and if the 10% threshold is exceeded, the reduction for the entire rental result is forfeited. Therefore, the threshold must be continuously monitored; for larger systems, outsourcing to a separate subsidiary GmbH is the safe route.
Design options
Pure holding structure
Real estate holding GmbH holds several property GmbHs, each with exclusive management. This allows the reduction to remain possible at every level.
PropCo/OpCo split
Owner GmbH (PropCo) leases to operating GmbH (OpCo). PropCo benefits from the reduction, while OpCo assumes the operational risk. A classic structure for hotels, nursing homes, and logistics properties.
Shelf companies for new projects
Instead of overburdening the existing portfolio, new investments can be made through shelf companies. The reduction remains isolated for each subsidiary.
Minority threshold
The jurisprudence has developed a minority threshold: ancillary activities below 5% of revenue are harmless if they are functionally necessary (e.g., waste disposal in the rental agreement). However, this threshold is narrowly interpreted — in case of doubt, check with TABAK.
Documentation obligations
The reduction is applied for in the context of the trade tax return. Important: clear separation of income, no mixing of favored and non-favored activities. During the audit, the reduction is regularly a focus of examination.
Over 20 years of consulting practice for entrepreneurs, investors, and family businesses. Tax-related reserved tasks are provided by the partner firm TABAK Steuerberatung.
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