BFH on extended reduction: En bloc sale of five properties leads to commercial real estate trading

In its ruling of June 3, 2025 (Ref. III R 12/22), the Federal Fiscal Court (BFH) made an important decision for the real estate industry: If a corporation sells several properties en bloc within a short period of time after acquisition, this may exclude the extended reduction under Section 9 No. 1 Sentence 2 GewStG.

What was the issue?
A limited liability company (GmbH) that was part of a real estate group acquired five apartment buildings in 2016. In 2018, less than three years later, these properties were sold on to another group company. The company applied for the extended reduction for real estate companies in its trade tax return. The tax office rejected the application, considering it to be commercial real estate trading.

Both the Berlin-Brandenburg Finance Court and the Federal Fiscal Court ruled in favor of the tax office: the extended reduction was to be denied.

The key statements of the Federal Fiscal Court

• Exceeding the three-property limit: Anyone who sells more than three properties within five years is generally considered a commercial real estate trader, even if the sale takes place in a single transaction (“en bloc”).

• No significance of sustainability: For corporations, the characteristic of “sustainability” (Section 15 (2) EStG) is not relevant for the extended reduction. The only decisive factor is whether the activity can still be classified as the mere management and use of own real estate.

• Fruit picking takes a back seat: If real estate is resold after a short period of time, the reallocation of assets has a greater impact on the activity than renting. This means that it is no longer a case of pure asset management, which is subject to preferential treatment.

Practical relevance
The ruling shows once again that the three-property limit can have serious consequences not only for private individuals but also for corporations.

Even if the sale takes place within the group and goes to only one buyer, this can lead to the assumption of commercial real estate trading.

Long-term financing or a lack of active sales efforts are not sufficient to refute the indicated intention to resell.

For real estate companies, this means that anyone who resells several properties shortly after acquisition risks losing the extended reduction and thus incurring a considerable additional trade tax burden.

Conclusion
The BFH makes it clear that the extended reduction is a privilege that must be interpreted narrowly. The en bloc sale of more than three properties is sufficient to lose this privilege, regardless of the sustainability or number of purchasers.

Companies should therefore carefully consider the tax consequences of a possible later sale when purchasing real estate.