Rental expenses for reusable containers in trade: addition for trade tax?

June 13, 2023

The Federal Fiscal Court (Bundesfinanzhof, BFH) once again had to decide on a question regarding the addition of rental/lease interest for trade tax purposes. According to the statutory regulation, in order to determine the trade income, one twentieth of the rental and leasing interest (including leasing instalments) for the use of movable fixed assets owned by another party are added back to the trade income under further conditions and after deduction of an allowance, insofar as they were deducted when determining the profit, i.e. were deductible as operating expenses.

The dispute concerned a wholesale company for fruit and vegetables that distributes the products of its producer organisation and paid for the use of so-called returnable crates (returnable containers for the transport and presentation of goods). It was disputed whether these were subject to addition for trade tax purposes. In the year in dispute, the taxpayer used the returnable crates from two different suppliers.

• Company H provided a comprehensive returnable and (return) logistics system. The crates were always delivered directly to the producers. From there, after being filled with the goods by the taxpayers themselves or on their behalf, they were shipped to the retail trade. Company H then operated the entire return logistics of the crates (collection from the retail trade and transport - if necessary via intermediate storage - to its depot including waste disposal, repair, sorting and cleaning of the crates). These services were referred to as system services.
• Company L, on the other hand, made the crates available to the taxpayer for collection from its depot. After filling by the producers, they were returned there by the taxpayer. The delivery to the retail branches of the L company and the return logistics of the crates were carried out by L in its own organisation.

On the one hand, it had to be clarified whether the crates were to be classified as fictitious fixed assets at the taxpayer, which is a prerequisite for the application of the addition rule. In this context, it must be determined whether the assets would be fixed assets of the tenant or lessee if they were his (fictitious) property. The decisive factor is the purpose of the asset in the business. The examination must also take into account the business purpose of the enterprise and be oriented as far as possible to the business circumstances of the taxpayer.

In this respect, the BFH, in its ruling of 1 June 2022 (Ref. III R 56/20), came to the conclusion in the case in dispute that if a trading company stipulates to its supplier, who has a permanent business relationship with it, that the supplier must deliver the goods in a certain type of crate, a repeated rental of this type of crate, assuming ownership, leads to the assumption of fixed assets. This means that this feature of the trade tax addition was fulfilled in the present case.

However, with regard to the crates rented by company H, the BFH came to the conclusion that in this respect there was no mere transfer of use. This was not the case in the present case, as the contractual relationship also contained extensive work, service and transport contract elements in addition to the transfer of use and the rental contract element did not give the overall contractual service bundle its character. The services of the “full logistics concept” go far beyond the “passive” transfer of use that characterises a rental and are therefore not to be assessed as a rental agreement within the meaning of the addition provision.

In this respect, it was significant that, according to the taxpayer’s submission, the costs attributable to transport and depot services (storage/cleaning) in the calculation of the fee far exceed the pure empties costs (depreciation, interest, repair, replacement), which would concern the rental agreement element. The taxpayer had argued that, according to information from H, the rental contract element accounted for only 14% of the total remuneration.

Also included was the fact that the fees were apparently not based on the duration of the transfer (e.g. daily, weekly or monthly rent), as is usual with rental and lease agreements, but each related to a “circulation” or “cycle”, namely from delivery by H, filling, marketing and transport by Stpfl. to collection from the end user.

An addition of the fees paid to H was therefore already excluded because they were not rental and lease interest. In contrast, the case of the rental of the crates from L was different and in this respect the rental fees had to be added.

Recommendation for action: This illustrates that with regard to the delimitation of the additions for trade tax, the respective facts must be assessed very carefully.