FG Thüringen on the add-back of rental and lease payments for trade tax purposes
Finanzgericht Thüringen (FG Thüringen, Thuringia Fiscal Court) commented on the trade tax add-back of rental and lease payments in its judgment of 5 February 2026 – 1 K 183/22. The central issue was whether payments for leased land and rented machinery must be partially added back to profits from business operations pursuant to § 8 Nr. 1 Buchst. d and e GewStG (German Trade Tax Act) if these expenses are included in the production costs of agricultural products.
The court ruled in favour of the claimant. According to the classification reported in specialist coverage, the judgment is regarded as final and binding. The decision follows the case law of the Bundesfinanzhof (BFH, Federal Fiscal Court), in particular the landmark judgment of 30 July 2020 – III R 24/18.
Facts: agricultural cooperative and products sold during the year
Leased land and harvesting machinery in the disputed year 2018
The claimant was an agricultural cooperative. In the disputed year 2018, it farmed leased arable land and grassland and also used rented harvesting machinery. The corresponding rental and lease payments were connected with the production of agricultural products, including field crops, animals and milk.
The products were sold in the same year. As a result, at least the harvested products that had already been sold were no longer part of the claimant’s business assets as at the balance sheet date. It was precisely this circumstance that was significant for the tax classification of the rental and lease payments.
Course of proceedings before the action
The disputed trade tax assessment notices were initially issued subject to review. The claimant had initially itself added back the rental and lease payments to the profits from business operations on a pro rata basis. A tax audit did not alter this treatment.
Only after the reservations of review had been lifted did the claimant lodge an objection. The objection proceedings were unsuccessful. The claimant then brought an action challenging the trade tax add-backs.
Legal starting point: § 8 Nr. 1 GewStG and the requirement of deduction
Add-back of rental and lease payments
Under § 8 Nr. 1 GewStG, certain financing components may be added back to profits from business operations. These include, under § 8 Nr. 1 Buchst. d GewStG, rental and lease payments for movable fixed assets owned by another party and, under § 8 Nr. 1 Buchst. e GewStG, corresponding payments for immovable assets.
According to the introductory sentence of § 8 GewStG, the add-back requires that the relevant amounts have been deducted in determining the profit. In practice, the add-back under § 8 Nr. 1 GewStG only has an effect once the relevant allowance has been exceeded. In the disputed year 2018, this allowance was still EUR 100,000; the increase to EUR 200,000 has applied only since 2020.
Production costs instead of immediately deductible expense
The decisive question was whether the disputed rental and lease payments were deducted as expenses in determining the profit or whether they were included in the production costs of the assets produced. Rental and lease payments for assets used in the production of agricultural products may, in principle, constitute material overheads or production overheads as a component of production costs.
If such expenses are included in production costs, then, according to the decision of FG Thüringen, there is to that extent no reduction in profit through rental or lease expense. The expense is neutralised by its accounting treatment as production costs. An add-back under § 8 Nr. 1 Buchst. d or e GewStG is not to be considered to this extent.
Decision of FG Thüringen of 5 February 2026
No add-back where included in production costs
FG Thüringen upheld the action. In the court’s view, rental and lease payments for the use of third-party movable or immovable assets are not to be added back on a pro rata basis under § 8 Nr. 1 Buchst. d or e GewStG insofar as they are included in the production costs of fixed or current assets.
The court thus focused on the statutory requirement of deduction in the introductory sentence of § 8 GewStG. If rental and lease payments are not treated as immediately deductible operating expenses but instead form part of production costs, there is to that extent no deduction as an expense required for the add-back.
Current assets disposed of before the balance sheet date also covered
According to FG Thüringen, this does not apply only where the produced asset is capitalised at its production costs. The principles also apply where current assets have left the business assets before the balance sheet date and therefore could no longer be recognised in the balance sheet.
In this respect, according to the decision, the only relevant factor is whether the rental and lease payments must be reclassified as production costs. It is sufficient that the expenses would have been capitalised as production costs if the relevant asset had still been part of the business assets on the balance sheet date and therefore would have had to be capitalised.
Hypothetically compliant accounting treatment as the benchmark
For this hypothetical assessment, the deciding senate proceeded on the basis of a taxpayer who acts in compliance with accounting law. The decisive factor is therefore how the accounting treatment would have had to be carried out in compliance with the relevant statutory requirements.
In the case decided, this meant that the lease payments for the farmed arable land and grassland as well as the rent for the harvesting machine were not added back to the profits from business operations on a pro rata basis insofar as they related to the production of the agricultural products.
Classification within BFH case law
Following the judgment of the BFH of 30 July 2020
FG Thüringen based its decision on the principles developed by the Bundesfinanzhof. In its judgment of 30 July 2020 – III R 24/18 – the BFH clarified that rental and lease payments are not to be added back insofar as they are included in production costs.
The Thuringian court applied these principles to the case in which the produced current assets had already been sold before the balance sheet date. In the case of crops sold before the balance sheet date, the profit may be affected through changes in inventories; from an accounting and trade tax perspective, however, according to this classification, this is then no longer rental or lease expense.
Reference to decrees of the Länder and administrative practice
Specialist reporting also places the decision in the context of the amendment to the identical decrees of the German Länder on the trade tax add-back of rental and lease payments. This classification shows that the distinction between expenses and production costs is significant for trade tax add-backs beyond the specific individual case.
The judgment directly concerns the disputed rental and lease expenses of an agricultural cooperative. However, the underlying considerations are linked to the general relationship between the law on production costs and the trade tax add-back of expenses.
Significance for companies with a production or agricultural connection
Relevance of rental and lease expenses connected with production
The decision is particularly significant for companies whose rental and lease expenses flow into the production process. This may be the case, for example, for manufacturing businesses and agricultural operations, insofar as the payments for third-party assets are included in the production costs of the assets produced.
The decision concerns only the extent to which rental and lease payments have the character of production costs. Insofar as expenses are not included in production costs, the statutory add-back assessment under § 8 Nr. 1 GewStG remains unaffected.
Key statements of the decision
Several key statements can be derived from the decision:
- Rental and lease payments are not to be added back insofar as they are included in the production costs of fixed or current assets.
- This also applies to current assets that have left the business assets before the balance sheet date.
- For hypothetical capitalisation, accounting treatment compliant with the statutory rules must be assumed.
- The decisive factor is the absence of a deduction as rental or lease expense within the meaning of the introductory sentence of § 8 GewStG.
According to the decision, actual capitalisation as at the balance sheet date is not required if it is omitted only because the asset no longer belongs to the business assets at that time.
Frequently asked questions
FG Thüringen 1 K 183/22: When are rental and lease payments not added back under § 8 Nr. 1 GewStG?
According to the judgment of FG Thüringen, no add-back is made insofar as rental and lease payments are included in the production costs of fixed or current assets. To this extent, the required deduction as an expense is absent.
Does the decision of FG Thüringen also apply to harvested products sold before the balance sheet date?
Yes, in the case decided, the court also covered agricultural products classified as current assets that had already been sold before the balance sheet date. The decisive factor was that the rental and lease payments would have had to be treated as production costs if the products had still existed on the balance sheet date.
What practical consequences does § 8 Nr. 1 GewStG have for manufacturing and agricultural businesses following the judgment?
The decision may be relevant for businesses whose rental or lease expenses are included in the production costs of their products. Under the principles of the judgment, a trade tax add-back is to be considered only insofar as the statutory requirements are actually met.
Tax law assessment by MTR Legal Rechtsanwälte
The decision of FG Thüringen illustrates that the trade tax treatment of rental and lease payments may depend decisively on the accounting classification of the expenses. Especially in production processes, in relation to current assets and assets sold during the year, the tax consequences must be carefully assessed in each individual case.
MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on questions concerning trade tax and the tax treatment of business expenses. Further information can be found at Legal advice in tax law.
