The Berlin-Brandenburg Finance Court recently had to rule on a case in which the tenant carried out major repairs on behalf of the landlord.
The taxpayer – in this case, the landlord – was ultimately unable to successfully argue that he had not received any income due to the offsetting of renovation costs against the basic rent payable, in accordance with the annex to the tenancy agreement. This is because income may still accrue to the taxpayer even if the tenant makes a payment to a third party, thereby settling a debt owed by the taxpayer (known as the ‘shortened payment route’).
Thus, if the tenant pays, in return for the provision of the let property, exclusively the costs to be borne by the landlord, the settlement of these liabilities results in income for the landlord from letting and leasing, which accrued at the time of payment by the tenant.
Note: Whilst these expenses may simultaneously constitute income-related expenses for the landlord, this does not alter their classification as income.