Real estate management company abroad
February 11, 2022 | 50,00 EUR | answered by Steuerberater Knut Christiansen
My wife and I live in Portugal and are also tax residents here.
Personally, I own a number of rental properties in Germany, with the rental income we use to support ourselves.
All my properties are located in Germany and are managed exclusively by my wife and me, meaning all administrative tasks such as rentals, accounting, maintenance...etc. are carried out by us ourselves and the services are entirely provided here abroad.
Neither my wife nor I receive any payment for this.
I would now like to establish a property management company abroad so that this management company can invoice me for the management of my properties at a market price.
The shareholders of the company would be my wife and I, with my wife as the managing director.
Although I am aware of the market price for full property management, I would of course substantiate it with appropriate offers from third-party providers.
Are there any problems/reasons why the tax office in Germany would not recognize the costs or fees of a property management company abroad owned by me or my wife?
Thank you very much.
Good day and thank you for using frag-einen.com!
Regarding your question, I would like to provide the following initial assessment.
In general, there may be a case of abuse of design according to § 42 AO (see §§ 7 AStG ff.)
Abuse of design may occur if the company abroad (base company) does not engage in any economic activity (non-functional intermediary company) or if a shareholder channels income generated in Germany through this corporation. This would result in income that should be taxed in Germany being taxed abroad. It needs to be determined whether an economic activity is being carried out, and not just asset management. An activity that could be considered as an "alibi activity" would not be sufficient.
The consequences of abusive design would be that the income transferred abroad would then be attributed to the taxpayer in Germany. Any taxes paid abroad would be credited or deducted taking into account the Double Taxation Agreement.
Therefore, it is advisable to obtain a binding information from the competent tax office in advance whether your case would be treated as abuse of design according to § 42 AO.
Please note that this forum only allows for an initial tax assessment and does not constitute final advice. Missing or incomplete information on the facts could also change the legal outcome.
Best regards,
Knut Christiansen
Tax advisor
