Extended trade tax deduction

A benefit that applies in full or not at all

A company that exclusively manages and uses its own real estate may deduct the trade profit attributable to it. The result is an entity paying essentially no trade tax, and for a portfolio holder that is not a side calculation; it is a central component of the after-tax return.

The operative word is exclusively. An activity going beyond managing the real estate does not endanger the deduction proportionally but entirely. That is where a solar installation creates a problem: selling electricity is a commercial activity, and without a statutory carve-out one roof with a supply arrangement would cost the deduction for the whole company.

The carve-out and its threshold

The legislature drew a line. Income from supplying electricity from renewable sources in connection with the company's own real estate is harmless as long as it stays below a share of the income from letting that real estate. Since assessment period 2023 that share is 20%.

Two details decide the application in a given case. First, what counts is income rather than profit, measured against the rental income of the same company. Second, the threshold is tested annually: a portfolio adding installations while rental income stays flat is walking towards it.

What follows for the structure

Where the threshold gets tight, the usual answer is not less solar but a separate company for the installations. The holding entity then lets the roof and stays within managing its real estate, while operating the system sits outside.

That separation has a price: an additional company, a lease or permission arrangement between related parties, and financing that no longer rests on the property portfolio. It is a trade-off rather than a default.

In conversations with residential portfolio owners this is the question that arrives before any yield calculation. A rooftop programme across a whole portfolio can work on the numbers and still be declined, because it touches a tax position several times larger than the electricity revenue.

For assessing a programme that means building the ratio first: expected electricity income against rental income, per company and not per building. Only then does the question of which supply model runs on which roof become meaningful.

The second practical point is sequence. The decision on the corporate structure belongs before commissioning, because moving installations into a new company afterwards touches real estate transfer tax, remuneration entitlements and financing agreements. This is orientation and not tax advice: the specific case belongs with a tax adviser.