Knowing what is in motion.
Renting out properties is a common form of income generation. However, what happens when dealing with particularly large residential spaces? In such cases, the assumption of income generation intentis not automatically granted. This article sheds light on the challenges and requirements associated with renting out apartments exceeding 250 square meters
Tax Requirements forRenting Out Large-Scale Properties
In accordance with current tax law, the taxpayer must demonstrate that the rental activity is conducted with the intention of making a financial profit. This proof is particularly crucial when dealing with large-scale apartments. Should losses result from the rental activity over anextended period and the proof of income generation intent cannot be provided,the rental activity is considered as non-relevant hobbyism for tax purposes.
The Federal Fiscal Court (BFH) has confirmed this legal opinion and emphasized that in the case of elaborately designed or equipped properties, a taxable activity cannot be automatically assumed. This is because the market rent often does not adequately reflect the special residential value, and the associated costs are often not covered. Therefore,it is necessary to demonstrate that a positive result can be achieved over a period of 30 years to justify the tax assessment of income.
Conclusion:
Renting out large-scale apartments presents a particular challenge when it comes to establishing income generation intent. Taxpayers should be aware of the requirements and take appropriate measures to demonstrate that the rental activity is based on a long-term and profitable basis. Compliance with applicable tax regulations is crucial to avoid undesirable tax consequences.
The year 2024 brings forth several additional changes in tax legislation that may be of significance to you as a taxpayer. From increased tax-free allowances to new relief measures for businesses, the upcoming adjustments will impact your financial situation. Let's take a closer look at the key changes ahead.
Basic Allowance and Maintenance Payments: In 2024, the basic allowance is increased by 696 euros to 11,604 euros. This means that employees will pay less income tax. Likewise, the maximum amount for the tax deduction of maintenance payments is raised accordingly to offset the so-called 'cold progression.'
Solidarity Surcharge: The threshold for the solidarity surcharge is raised to 18,130 euros for individual assessment and 36,260 euros for joint assessment starting in 2024. This means that approximately 90 percent of those who previously paid this surcharge will be exempt from it.
Employee Savings Incentive and Employee Participation: In 2024, the income thresholds for the employee savings incentiveare doubled. For singles, the new threshold is 40,000 euros, while for jointly assessed married or partnered individuals, the threshold is 80,000 euros. This regulation applies to both the investment of savings benefits in financial participations such as investment funds and for housing-related uses such as building savings.
Furthermore, the tax-free allowance for employee participation in the employer's company is increased from 1,440 euros to 2,000 euros. This means that employees can now receive up to 2,000 euros tax-free in employee participation, providing an attractive opportunity to participate in the company's success.
Child Allowances: The child allowances are increased by 360 euros to 9,312 euros.
Electricity Tax Relief: Companies engaged in manufacturing, agriculture, or forestry receive an electricity tax relief of 20 euros per megawatt-hour when they use electricity taxed at the standard rate for operational purposes
Conclusion:
The tax changes for the year 2024 bring a range of benefits for both employees and businesses. From increased tax-free allowances to relief from the solidarity surcharge, it is worthwhile to keep an eye on these changes and potentially benefit from the new regulations. And this is just a snapshot of the many changes that the new year brings. It is advisable to stay informed about all relevant developments early on to make the most of financial advantages
The Growth Opportunities Act, officially known as the "Act to Strengthen Growth Opportunities, Investments, and Innovation as well as Tax Simplification and Tax Fairness," is intended by the Federal Government to financially support companies and encourage them to invest more in investments and innovative projects. The goal is to transform the economy, enhance competitiveness, and make Germany a more attractive business location.
New Tax Regulations:
Increased Deductibility of Gifts: The threshold fordeductible gifts to external parties has been raised from 35 EUR to 50 EUR, first applicable for fiscal years starting on or after December 31, 2023.Companies can now claim tax deductions for gifts up to a value of 50 EUR.
Tax Benefits for Electric Vehicles: The maximum limit of the gross list price for the private use of company electric vehicles has been raised from 60,000 EUR to 70,000 EUR. This change is intended to boost demand for electric vehicles and better accommodate the increased acquisition costs.
Temporary Reintroduction of Declining Balance Depreciation: In light of the current crisis situation, companies can now also avail themselves of declining balancedepreciation for assets acquired or produced between March 31, 2024, and January 1, 2025. However, the applicable percentage is limited to twice the straight-line annual depreciation rate and must not exceed 20% (prior tomediation committee: two and a half times and 25%).,
Temporary Introduction of Declining Balance Depreciation for Residential Buildings: The Growth Opportunities Act introduces a significant change regarding declining balance depreciation:
For buildings serving residential purposes and located in an EU or EEA member state, a declining balance depreciation of 5% has been introduced. This regulation applies to buildings where construction begins after September30, 2023, and before October 1, 2029, or when the mandatory purchase contractis effectively concluded after September 30, 2023, and before October 1, 2029. During declining balance depreciation, deductions for extraordinary technicalor economic wear and tear are not permitted, but a switch to straight-lined epreciation is allowed if necessary.
Special Depreciation for New Residential Rental Construction: The special depreciation for new residential rental construction remains unchanged. It can be claimed, among other conditions, when new apartments are created through construction measures based on a building application submitted after August 31, 2018, and beforeJanuary 1, 2022, or after December 31, 2022, and before October 1, 2029. The acquisition or production costs must not exceed 5,200 EUR (previously 4,800EUR) per square meter of living space. The basis for calculating the special depreciation is a maximum of 4,000 EUR (previously 2,500 EUR) per square meter of living space.
Increased Special Depreciation for Investments: The special depreciation is expanded: Previously, businesses that did not generate more than 200,000 EUR in profit in the year before the investment could depreciate up to 20% of the investment costs. In the future, up to 40% (prior to mediation committee: 50%)of the investment costs can be depreciated. This regulation applies to acquisitionsof assets after December 31, 2023.
Expanded Loss Carryforward: The loss carryforward has been increased to amaximum of 70% of the total amount of income for the assessment periods from 2024 to 2027, and it also applies to corporate income tax. From 2028 onwards,the percentage limit of 60% will be applied again.
Increase in the Threshold for Tax-Free Capital Gains: The threshold for tax-freegains from private sales transactions is raised from 600 EUR to 1,000 EUR.
Changes in Value Added Tax (VAT) Prepayment: Entrepreneurs are generally exempt from the obligation to submit a VAT prepayment if the tax for the previous calendar year does not exceed 2,000 EUR.
Changes in Cash-Based Taxation: The threshold for applying cash-based taxation is raised from 600,000 EUR to 800,000 EUR.
Thresholds for Mandatory Bookkeeping: Commercial entrepreneurs as well as agricultural and forestry businesses that generate a total turnover of more than 600,000 EUR per calendar year for the individual business were previously required to keep books. This threshold is increased to 800,000 EUR. Similarly,the threshold for mandatory bookkeeping in case of a profit of 60,000 EUR is raised to 80,000 EUR.
Introduction of Suspension Interest for Liability Claims: Suspension interest nowalso applies to liability claims arising after December 31, 2024.
Conclusion:
The German Federal Government aims to continue its course of strengthening the economy, and with the revised Growth Opportunities Act of March 27, 2024, it has taken a small step in that direction. This law aims to financially support businesses and create incentives for investments and innovative projects. The new tax regulations, including the increased deductibility of gifts, tax benefits for electric vehicles, and the temporary reintroduction of declining balance depreciation, are intended to encourage companies to invest and boost the economy. Measures such as the special depreciation for new residential rental construction and increased special depreciation for investments are expected to further drive growth. The expanded provisions for loss carry forward and the raising of the threshold for tax-free capital gains will also reduce the tax burden. Overall, these comprehensive changes are intended to enhance Germany's attractiveness as a business location and strengthen its competitiveness.
For the fourth time, we have been honored by Manager Magazin: In the 'Medium-Sized Business' category, we once again belong to Germany's best auditors in 2024/2025.
On March 21st, the award ceremony for 'Germany's Best Medium-Sized Business Auditors 2024/2025' took place in Berlin as part of a festive evening. Mauer GmbH has been honored for the fourth consecutive time since the competition began in 2018 and in the current competition, it was rated with five stars, 'excellent', in the areas of Audit, Tax, Advisory, and ESG. What a great incentive to reaffirm this rating in the coming years!
This is no ordinary success. Only those who excel throughout standing performance are honored – and without the possibility of applying for this competition, as participation is by invitation only. It's a validation that stems from careful internal and external evaluation, including feedback from over 1000 executives and decision-makers in the German economy.
We take pride in the recognition of our tireless dedication,expertise, and commitment to the success of our clients and business partners.
It was intriguing to learn how we were evaluated in theso-called Impact Dashboard. In addition to excellent professional performance,other decisive criteria were queried, analyzed, and evaluated, questioning how auditors can make an impact on their clients. Our outstanding rating in all 3 categories of the Impact Dashboard – Confidence (technical and socialunderstanding), Trust (integrity and openness), and Sympathy (mannerisms and attractiveness) – is another reason for joy and affirmation of our work. The fact that our clients also appreciate us as 'thought leaders' is naturally very pleasing.
A huge thank you to our team, our clients, and everyone who has been on this journey with us.
As in previous years, we are once again taking part in the career fair on the 16th of May, organised by the Tigers Tübingen in cooperation with the University of Tübingen.
This is an opportunity for students to get to know us in a relaxed atmosphere and to take part in some great free activities such as free throw competitions and enjoy some delicious food.
At previous fairs we have had the opportunity to meet many wonderful people and recruit new staff. So we are really looking forward to meeting and networking with exciting talent again this year.
Once again this year, we will be taking part in the "Meet the Big Players" career fair at the University of Tübingen. Students will get to know our company in a playful way and gain an insight intoour operations. After the snacks, there will be an open exchange of ideas and our colleagues will be available to answer any questions.
We are looking forward to meeting these exciting talents and engaging in depth discussions.
The Mauer Group is proud to be a major partner of the Tigers Tübingen. As a leading management consulting, auditing and tax advisory firm based in Reutlingen, we are delighted to have the opportunity to combine our expertise and commitment to medium-sized businesses with such a prestigious sports organisation.
Our firm was founded in 2010 and has since established an excellent reputation. Stephan Mauer and Prof. Dr. Stefan Marx lead the company with dedication and passion.
Our specialisation in small and medium-sized businesses is deeply rooted in the belief that these companies are the backbone of our economy. Therefore, the partnership with Tigers Tübingen is not only an opportunity for us to expand our network, but also to strengthen our regional ties. We see this collaboration as a way to deepen our relationships within the region and solidify our presence in the local business community.
The partnership with Tigers Tübingen is always an exciting one, bringing not only sporting success but also business opportunities. We look forward to continuing to share our commitment to the mid-market and our passion for excellence in advisory services with the Tigers and their community.
Sustainable practices and responsible business are becoming increasingly important. Consequently, the Mauer Group has taken a major step that not only affects its external appearance, but also reflects its internal self-image.
The decision to revise the corporate design is no coincidence. For the Mauer Group, sustainability is not just a trend or an option, but an integral part of its corporate philosophy. The new colour symbolizes its commitment to a world in which economic success goes hand in hand with corporate responsibility and sustainability. Following the key principle of "operate securely and sustainably", the Mauer Group is emphasizing its ambition to play a pioneering role in sustainable entrepreneurship – whether for customers such as freelancers, medium-sized companies or DAX-listed corporations. Customers benefit, for example, from the comprehensive expertise in auditing and consulting on all aspects of sustainability reporting, which around 15,000 companies in Germany now have to take into account. Special attention is paid to advising and supporting all healthcare professions such as doctors, medical practices and medical centres. Here, the Mauer Group has also built up a first-class network that goes beyond traditional tax consultancy services.
Therefore, the Mauer Group is redefining itself in two strategic areas: As experts in Tax & Auditing (mauer-berater.com), as well as experts in Sustainability Advisory & Governance Risk Compliance (mauer-wpg.com). This expertise is united under one roof at the Reutlingen and Stuttgart locations to accompany companies on their path to a sustainable future.
With a local presence and an international network, the consultants of the Mauer Group support their clients with personality and empathy. Because for them, it is not only the result that matters, but also the path to it. A path characterised by integrity, trust and a shared vision.
Our working world is undergoing rapid change with high dynamics. 'New Work' is the trend of the hour. Not least, the COVID-19 pandemic has led to the sudden triumph of mobile working and home offices.
Walter Meinlschmidt, an interior design expert from Balingen, auditor/tax consultant Stephan Mauer, and labor law specialist Dr. Ralf Kittelberger have illuminated all aspects of New Work: from conception to current labor and tax law issues.
Another expert joined the discussion: Dr. Stefan Wolf, CEO of the publicly listed ElringKlinger AG from Dettingen and head of the employer association Gesamtmetall, enriched the conversation with his innovative statements and visions for new work environments.
Since the beginning of 2023, Prof. Dr. Stefan Marx has been a partner and managing director at Mauer Unternehmensberatung GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft.
Diplom-Kaufmann (MBA equivalent), Prof. Dr. Marx is an auditor and tax consultant, holder of the chair for auditing and accounting, and has been the dean of the Business Administration program (B.Sc.) at the Hochschule für Wirtschaft und Umwelt Nürtingen-Geislingen since September 2019. Before joining Mauer in 2020, Prof. Marx held a leadership position for over 20 years at a Big Four firm in Nuremberg. Here, he increasingly specialized in the field of Corporate Governance: risk management, compliance, internal control systems, and internal auditing.
Diplom Kaufmann (MBA equivalent) Prof. Dr. Marx is an auditor and tax consultant, holder of the chair for auditing and accounting, and has been the dean of the Business Administration program (B.Sc.) at the Hochschule für Wirtschaft und Umwelt Nürtingen-Geislingen since September 2019. Before joining Mauer in 2020, Prof. Marx worked in a leadership role for over 20 years at a Big Four firm in Nuremberg. During this time, he increasingly specialized in the field of Corporate Governance, focusing on risk management, compliance, internal control systems, and internal audit.
In addition to Stephan Mauer and Florian Kalbfell-Werz, Prof. Marx is now the third Managing Partner at Mauer. Stephan Mauer and Florian Kalbfell-Werz are excited to have another highly qualified colleague and professional in the management and shareholder circle of Mauer GmbH. Prof. Marx is responsible for the Governance, Risk, and Compliance (GRC) division at Mauer, which also includes the rapidly growing and regulated ESG (Environmental, Social, and Governance) consulting fields. In Germany alone, around 15,000 companies will have to implement EU regulations in the short term.
Prof. Marx explains: 'The term ESG is often narrowed down to climate neutrality, but it also encompasses the social aspects of corporate action and the principles of value-oriented corporate management. Companies affected must report on these three dimensions of sustainability in the future.' Sustainability-related corporate key figures are then on par with financial key figures. The challenges to processes and integration into the risk management and internal control systems of companies are often underestimated. 'Our goal is to support, improve, and secure companies in these matters,' says the new Managing Partner.
Beyond the integration of sustainability aspects into governance systems, Prof. Marx has been pragmatically and value-oriented in helping Mauer's clients build internal control systems from day one, assessing the effectiveness of risk and compliance management systems. The conduct of internal audits - covering tax to forensic issues - is also an integral part of his repertoire.
The colleagues at Mauer welcome the entry of Prof. Stefan Marx as a Managing Partner and wish him continued success and all the best!
On August 30, 2023, the German government released a draft for the "Act to Strengthen Growth Opportunities, Investments, and Innovation as well as Tax Simplifications and Tax Fairness." The law is part of a "Ten-Point Plan for the Economic Location Germany," which the federal government has published. The objective of the law is to provide impulses for increased growth, innovation, and investments to enhance Germany's competitiveness. In addition to introducing an investment incentive for companies, which will be the focus of this article, the law envisions numerous changes in tax regulations.
What Companies Need to Know?
The plan is to introduce investment incentives for companies to promote the transformation of the economy, particularly towards increased climate protection. Both newly acquired and manufactured movable assets, as well as measures for the preservation of existing ones, can be eligible. For this, the asset must be included in an energy-saving concept, lead to an improvement in energy efficiency, and be used almost exclusively for business purposes in the current and subsequent fiscal years. The energy-saving concept must have been created with the assistance of an energy consultant from the "Federal Funding for Energy Consultation for Non-Residential Buildings, Facilities, and Systems" program. Additionally, it must meet the requirements of an energy audit.
Excluded from the funding are investments in combined heat and power (CHP), district heating or cooling, or energy systems operated with fossil fuels.
Eligible parties can apply for funding - the basis for the investment must be at least €10,000. The basis is derived from the sum of all eligible expenses. However, it must not exceed €200 million per eligible entity. A 15% subsidy of the basis is granted as an investment incentive.
The funding period is expected to begin on January 1, 2024, or, at the earliest, on the day after the announcement, and end on January 1, 2030. In general, the supported investments should start and conclude within this period. Investments completed after December 31, 2029, are only eligible if partial manufacturing costs have been incurred before January 1, 2030.
Conclusion
The law is currently before the Bundestag, with the intention of passing it in November. The government aims to secure the approval of the Bundesrat by December 15, 2023, at the latest, so that the law can come into effect at the beginning of 2024. However, several federal states are dissatisfied with the draft, fearing significant tax revenue losses. It remains to be seen whether the planned law will receive approval in the Bundesrat.
Do you have any questions on the topic?
Feel free to contact us at 07121/909020 or via email at dialog@mauer-wpg.com.
Review oft he Property Tax Reform
The Federal Constitutional Court declared the previous calculation basis for determining property tax unconstitutional. The court ruled that there was discrimination against property tax payers due to the outdated basis for the unit values of properties, relying on data from 1935 for East Germany and 1964 for West Germany. As a result, approximately 36 million property owners must now have the calculation basis for property tax recalculated.
All property owners are legally obligated to comply with the recalculation of their properties through a property tax declaration. They are supported in this process by information letters that have already been sent to all private property owners by the tax authorities.
Current Status oft he Property Tax Reform:
The submission deadline ended nationwide – except for Bavaria – on January 31, 2023 (or April 30, 2023). According to a spokesperson for the Federal Ministry of Finance, approximately 75% of nationwide property tax declarations were submitted by the end of January 2023. In general, property tax declarations had to be submitted electronically through the Elster portal. However, about 10% of the submitted property tax declarations were still made on paper forms.
Due to doubts about the constitutionality of the new valuation rules for real estate and land as part of the property tax reform, sample proceedings for judicial clarification are already underway. Besides the proceedings of the Taxpayers Association of Baden-Württemberg and the Homeowners' Association of Baden-Württemberg within the state itself, the German Taxpayers Association and Home & Property Germany will jointly file lawsuits against the federal model, which applies in eleven states. Judgments are expected in the coming years. Therefore, it is recommended to file a precautionary objection against the property tax assessment notice. The objection period is one month from the receipt of the tax assessment.
The European Green Deal compels companies to operate more sustainably and make their corresponding business models more transparent. The advancing digitization adds additional pressure. For the Advisory sector, this means: expanding competencies.