Anyone who, as a sole trader, carries out several commercial activities will sooner or later ask themselves: Are these taxed separately or collectively? In a recent judgement, the Federal Fiscal Court (BFH) has clarified the criteria according to which trade tax authorities determine whether there is one or more business operations, thereby overturning the previous fiscal court judgement. The case reference is X R 8/23; the judgement was handed down on 28 January 2026 and published on 16 July 2026.
The case: Two recycling businesses under one roof
An entrepreneur ran a wholesale business dealing in second-hand materials and waste materials. On the same premises, his mother ran a scrap metal business. Following her death, he also inherited this business. He maintained separate accounts and separate bank accounts, used different company signs and submitted a separate trade tax return for each business.
The tax office took a different view. It regarded both activities as forming part of a single business and therefore issued only one joint trade tax assessment notice. The Finance Court upheld this assessment. The Federal Fiscal Court, however, referred the case back because the facts of the case were insufficient to reach a final judgement.
The legal question: Is it one business or two?
Under Section 2(1) of the Trade Tax Act, trade tax is levied on the individual business. Whether a person operates one or more businesses depends on two main factors:
- Similarity of tasks: Where activities are of a similar nature, case law presumes that they form part of a single business. However, this presumption may be rebutted if there is no objective connection between them.
- Diverse activities: In this case, the opposite applies. The fact that the businesses are dissimilar generally suggests that there are several separate businesses. A single business is nevertheless possible if there is a sufficient economic, organisational and financial link between them.
In this regard, the Federal Fiscal Court (BFH) emphasises a tiered approach: the more diverse the activities, the stronger the factual connection must be in order for the business to still be regarded as a single entity.
What counts as a connection
An economic link exists where both activities support and complement one another. An organisational link may arise from shared premises, shared staff or joint procurement. Shared accounts, a unified method of determining profit, or the offsetting of losses between the divisions are indications of a financial link.
Special circumstances in the event of inheritance
The Federal Fiscal Court (BFH) makes it clear that even a business acquired by inheritance does not automatically result in a merger. The entrepreneur’s subjective intention to keep the businesses separate is not, on its own, sufficient. The decisive factor is whether the separation was objectively recognisable and actually implemented. At the same time, however, it must not be overlooked that two independent businesses existed prior to the mother’s death. If there is no discernible change following the transfer, this may indicate that two businesses continue to exist.
What does this mean for business owners?
Anyone who runs several businesses and wishes to keep them separate for tax purposes should not limit this separation to mere paperwork. Keeping separate accounts is an important indicator, but it is not decisive on its own. What matters is how things are actually organised in day-to-day operations: who makes the purchases, who are the customers, and are there shared staff or business assets? It must be possible to provide specific answers to all these questions. If in doubt, it is advisable to seek tax advice before the tax office decides to treat the businesses as a single entity.
Source: Haufe: Tax
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
