Decision with design potential: Land under construction does not constitute harmful administrative assets

According to Section 13 (4) no. 1 ErbStG, land leased to third parties is considered harmful administrative assets and is generally not subject to inheritance and gift tax. But what about properties that are still under construction? It becomes particularly interesting if there is already an intention to let the property to third parties at a later date.

The Münster tax court (judgments of 14.11.2024 - 3 K 906/23 F & 3 K 908/23 F) has ruled: In such cases, there are no tax-damaging administrative assets. The key question: Are the requirements of Section 13b para. 4 no. 1 ErbStG met at the time of the gift?

According to the court, no - because at the time of the transfer, the property was not rented out to third parties but was under construction. The purpose of the law is clear: the tax relief for business assets is to be prevented if they would be classified as risk-free private asset management due to being rented out to third parties.

However, in the case of unused property, it remains unclear whether it will later be used for business purposes or rented out to third parties, and the strict cut-off date principle prevents possible future uses - whether due to the nature of the property or the purpose of the company - from being taken into account to the detriment of the taxpayer.

The court also made it clear that the choice of the transfer date is a free decision of the donor and the donee and does not constitute an inappropriate arrangement. Furthermore, the decision did not affect the complexity or effectiveness of the gift.

If the BFH confirms the decision on appeal, this will provide an exciting opportunity to avoid harmful administrative assets.

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