BFH specifies extraordinary expenses under § 202 BewG
The Bundesfinanzhof (BFH, Federal Fiscal Court) has commented, in its judgment of 06.05.2026, case no. II R 2/24, on the valuation of shares in a corporation using the simplified income approach. The central question was when expenses are to be added back to the initial value as extraordinary expenses within the meaning of § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG (Bewertungsgesetz, German Valuation Act).
According to the decision, expenses may also be extraordinary if they are connected with an undertaking’s ordinary business operations. In the BFH’s view, the decisive factor is whether they are not expected to affect the annual earnings that can be sustainably generated in the future. The judgment was released for publication on 16.07.2026 and is listed in the official list of the Bundesministerium der Finanzen (BMF, Federal Ministry of Finance) on the application of new BFH decisions; the tax authorities have scheduled its publication in the Bundessteuerblatt Teil II (Federal Tax Gazette Part II).
Facts: Share valuation following gift of GmbH shares
Valuation occasion and assessment notice
The claimant and appellant on points of law was a GmbH (German limited liability company) that operated a forwarding business. As of 01.01.2017, the joined party 1 gifted 50 percent of the shares in another GmbH to the joined party 2. For gift tax purposes, the Finanzamt (tax office), by notice dated 03.08.2023, separately and uniformly determined the value of the share in the claimant pursuant to § 151 Abs. 1 Satz 1 Nr. 3 BewG.
The tax office applied the simplified income approach and assessed the share value at an amount of x euros. In doing so, it added default interest that the claimant had to pay due to customs duties back to the initial value as extraordinary expenses pursuant to § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG.
Background to the customs duties and default interest
The customs duties arose from court proceedings conducted abroad with an EU Member State. The matter concerned customs documents that the claimant had prepared in 1992 for deliveries abroad and that, due to unexplained circumstances, did not reach the competent customs authorities. The principal debt was reimbursed by the claimant’s insurer.
According to the findings of the lower court, the claimant was most recently ordered by a foreign court in 2012 to pay customs duties in the amount of 3,932,080 units of the foreign currency plus default interest. A legal remedy was finally unsuccessful before the highest court there in 2015. The disputed customs matters concerned five individual transactions, which the Finanzgericht (Fiscal Court) grouped together due to their similarity and classified as extraordinary in terms of their origin.
Issue in dispute: Classification of default interest in business valuation
Claimant’s position
The claimant argued that the interest expenses had to be fully taken into account when valuing the shares under the simplified income approach. In its view, this led to a negative income value in the determination period, with the result that, pursuant to § 11 Abs. 2 Satz 3 BewG, the shares were to be valued only at their asset value in the amount of y euros as the minimum value.
In particular, it objected to the interpretation of the term extraordinary expenses by the Finanzgericht. According to its submission, import charges such as customs duties and import VAT are a consequence of the regular activity of a customs forwarding company. Being held liable for performance disruptions was also not unusual for a customs forwarding company.
The claimant also relied on the former accounting-law provision of § 277 Abs. 4 HGB a.F. (Handelsgesetzbuch, German Commercial Code, former version). Under that provision, extraordinary expenses were expenses incurred outside the ordinary business activities of a corporation. It took the view that this former accounting-law definition should be used as the point of reference.
Submissions on the economic burden
According to the claimant’s submissions, payment of the interest liability in instalments burdened business operations in subsequent years. It further stated that distributable funds had been depleted at least until the 2022 financial year. According to its submissions, insolvency could only be averted because an instalment payment agreement had been reached.
The claimant also pointed out that the accumulation of interest typically results from lengthy proceedings. Even from the Finanzgericht’s perspective, it had to be taken into account that interest may also skim off an advantage obtained by the debtor through retaining the amount owed.
Lower court: Finanzgericht Münster dismissed the action
The lower court was the Finanzgericht Münster (Münster Fiscal Court), 3rd Senate, judgment of 05.12.2023, case no. 3 K 1777/23 F. The action was dismissed, the costs were imposed on the claimant, and leave to appeal on points of law was granted.
The Finanzgericht considered the add-back of the expenses connected with the customs duties assessed by the foreign state, including ancillary charges and default interest, to be correct. It classified the default interest as extraordinary expenses within the meaning of § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG.
In its assessment, the Finanzgericht took into account, among other things:
- the reason why the customs duties and interest arose,
- the similarity of the five customs transactions concerned,
- the extraordinary amount of the default interest,
- the particularly long duration of the foreign proceedings,
- Poland’s accession to the EU in 2004 and the associated membership of the European customs union.
Decision of the BFH: Appeal on points of law unsuccessful
Confirmation of the add-back
The BFH dismissed the claimant’s appeal on points of law as unfounded. In the court’s view, the Finanzgericht had correctly held that the interest expense arising from being held liable for the customs duties constituted an extraordinary expense within the meaning of § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG. The expense therefore had to be added back to the initial value pursuant to § 202 Abs. 1 Satz 1 BewG.
The BFH thereby confirmed the assessment of the Finanzgericht. From a professional perspective, the decision is classified as a continuation and specification of the BFH’s previous case law on the interpretation of extraordinary expenses to be added back.
Principles of the simplified income approach
For the valuation of shares in corporations, the simplified income approach may be applied pursuant to § 199 Abs. 1 BewG, provided it does not lead to manifestly incorrect results. The decisive factor is the annual earnings that can be sustainably generated in the future, which must be determined pursuant to §§ 201 and 202 BewG and multiplied by the capitalisation factor under § 203 BewG.
The average earnings are generally derived from the operating results of the last three financial years ending before the valuation date. Pursuant to § 202 Abs. 1 Satz 1 BewG, the starting point for the operating result is profit within the meaning of § 4 Abs. 1 Satz 1 EStG (Einkommensteuergesetz, German Income Tax Act). This initial value must be adjusted pursuant to § 202 Abs. 1 Satz 2 BewG by certain items, including extraordinary expenses.
Interpretation of the term “extraordinary expenses”
No statutory definition in the BewG
The term extraordinary expenses is not expressly defined in the Bewertungsgesetz. The same applies to extraordinary income, which is to be deducted pursuant to § 202 Abs. 1 Satz 2 Nr. 2 Buchst. b BewG. The BFH therefore relied on the wording, structure, legislative history and purpose of the provision.
According to common usage, “extraordinary” describes something that deviates from what is usual or stands outside the ordinary order. This may include expenses that do not usually arise in the course of normal entrepreneurial activity. In this context, the BFH mentioned, for example, administrative fines, criminal fines or being held liable as a liability debtor or tax debtor for a third party’s charges.
Purpose of the adjustment under § 202 BewG
According to the decision, the add-back under § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG serves to eliminate from the initial value effects that do not permit a reliable statement regarding the annual earnings that can be sustainably generated in the future. When introducing the provision, the legislature intended to correct such reductions or increases in assets that are one-off or, at any rate, do not affect the annual earnings that can be sustainably generated in the future.
According to the BFH, it is not decisive whether the expense is incurred in several financial years. An expense that affects several years due to provisions, increases in subsequent years or instalment payments may also be extraordinary. § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG does not require that an expense has arisen only once.
Ordinary business operations do not preclude extraordinariness
The BFH rejected aligning the term extraordinary expenses solely with whether the expenses are incurred outside ordinary business activities. It left open whether the former provision of § 277 Abs. 4 Satz 1 HGB a.F. can be used at all for interpreting § 202 BewG.
In the BFH’s view, expenses that arise in the course of ordinary business activities may also be extraordinary in terms of their legal basis, frequency and amount. The decisive question is whether they are likely to affect the annual earnings that can be sustainably generated in the future. Whether they arise in ordinary business operations is irrelevant for this purpose.
Standard of overall assessment in the individual case
According to the BFH, whether expenses are extraordinary during the period under review must be assessed on the basis of an overall appraisal of the specific circumstances. In particular, the legal basis of their origin, the frequency and the amount of the expenses in relation to comparable expenses previously incurred in ordinary business transactions must be included.
In the case in dispute, the BFH considered the overall assessment by the Finanzgericht not to be objectionable in terms of appeal law. The Finanzgericht had assumed that the default interest and the underlying customs duties were extraordinary in terms of their origin, their frequency and their amount.
One factor relevant to this assessment was that the claimant had not submitted that it had later again been held liable for default interest on customs duties in a comparable amount. Likewise, the Finanzgericht saw no sufficient indications that comparable liability was to be expected in the future as a result of regular business operations.
In addition, according to the Finanzgericht’s assessment, the default interest was based on customs duties that arose because the customs documents prepared in 1992 were not transmitted to the customs authorities due to unexplained circumstances. In the Finanzgericht’s view, this differed from the usual liability for customs duties in normal forwarding operations. The particular duration of the proceedings also led, in its view, to an amount of default interest that was unusual compared with ordinary business activities.
Significance for business valuation and tax practice
The decision makes clear that, when valuing shares under the simplified income approach, the formal proximity of an expense to business activities is not the only decisive factor. Expenses that may arise from risks in a particular line of business are not automatically to be treated as having a sustainable effect on earnings.
Rather, classification under § 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG depends on an evaluative assessment of the specific facts. The criteria of legal basis, frequency and relative amount of the expenses are given particular weight by the decision.
The planned publication in the Bundessteuerblatt Teil II and inclusion in the BMF list on the application of new BFH decisions indicate that the tax authorities will apply these principles generally. The decision therefore concerns not only forwarding companies, but may also become relevant in other cases in which extraordinary burdens affect the results of past financial years.
Frequently Asked Questions
BFH II R 2/24: When is default interest on customs duties an extraordinary expense under § 202 BewG?
According to the BFH, expenses are extraordinary if they are not expected to affect the annual earnings that can be sustainably generated in the future. It is irrelevant whether they arise in ordinary business operations.
§ 202 Abs. 1 Satz 2 Nr. 1 Buchst. c BewG: Which criteria apply to extraordinary expenses?
An overall assessment of the individual case is required. In particular, the legal basis of their origin, the frequency and the amount in relation to comparable earlier expenses in ordinary business transactions must be taken into account.
What practical consequences does the BFH judgment II R 2/24 have for companies in share valuations?
The judgment shows that extraordinary burdens may be added back to the initial value when performing a valuation under the simplified income approach. This can affect the income value determined if the expenses in question are not representative of the annual earnings that can be sustainably generated in the future.
Assessment by MTR Legal Rechtsanwälte
The BFH judgment specifies the requirements for the treatment of extraordinary burdens under the simplified income approach and places the assessment of the individual case at the centre. Particularly in share valuations for gift tax or inheritance tax purposes, questions regarding the scope of § 202 BewG can be of considerable importance. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on tax-law issues in connection with business valuations and share transfers; further information can be found under Legal advice in tax law.
