Hobby
A hobby is the activity of a taxpayer that is carried out without the intention of making a profit . The activity does not primarily serve to generate positive income , but is carried out by the taxpayer for personal reasons or due to personal inclinations. In the hobby there is consequently no economically relevant activity aimed at generating positive income. Income resulting from the hobby is not taxable, negative income, i.e. losses, cannot be offset against positive income from other sources of income.
Income tax
The concept of hobby has only income tax meaning. In terms of sales tax, the term hobby is not relevant, as Section 2 (1) UStG speaks of the intention to generate income . This is to be distinguished from the intention to generate profit . Consequently, in the case of permanent losses, the VAT entrepreneur status can be given, even if the activity is classified as a hobby for income tax purposes.
Evidence of hobby
Hobbies in the tax sense are not only activities that are "just for fun", but also those that are pursued for idealistic motives or the like. What is decisive for the existence of a hobby and not of profit income is not only that the operator has no subjective intention to make a profit, but also that there is no objective chance of making profits. In the opinion of the Federal Fiscal Court, this is the case if a business is not run from an economic point of view or if, by its nature, cannot make a profit in the long term.
A classic indication of the lack of intention to make a profit and thus the existence of a "hobby activity" is the continuation of the activity despite ongoing losses as well as (start-up) losses that go beyond the usual start-up time . The decisive factor for income taxation and thus for balancing negative income with positive income is the intention to generate positive income over a longer period of time as part of an overall plan. H. To achieve profit or surplus (so-called total profit forecast). Activities are only aimed at generating positive income if they are supported by the pursuit of an increase in (business) assets.
The following criteria are indications of a hobbyist activity:
- it is a hobby ,
- the subsistence or the resulting losses are financed or offset with other income.
- Despite long-term losses, the activity is neither given up nor the type of operational management changed.
- Overall, no total surplus can be achieved in the long term (so-called total surplus forecast ), although the period under consideration in tax law varies. There is a tendency for the rental of real estate to generally last several decades, whereas a period of 7–15 years can be assumed for a business.
Start-up losses
Start-up losses in the start-up or development phase of the company are not in themselves an indication of a hobby. Insofar as the tax authorities can see from the outset that the company is not making a profit, losses are not to be recognized; Otherwise, the tax assessment , as far as the presumed hobby is sufficient, should be carried out provisionally , since it is disputed whether the condition for the assessment of the tax has occurred.
Insofar as the losses in the start-up phase are due to the personal inclinations of the taxpayer, these are usually only to be taken into account for tax purposes if the tax authorities are presented with a conclusive concept from which it can be inferred that a total profit is sought. The duration of the start-up phase should be determined individually and in relation to the sector.
Taxation Practice
In terms of procedural law, the income tax consideration / non-consideration of the hobby is kept open by issuing preliminary tax assessments across time until the question of the existence of the intention to achieve a total surplus has been clarified. Financial management is then at denial of the total surplus making entity according to § 165 , para. 2 sets 1 and 2 AO entitled with otherwise been incurred existing power to change. This can result in considerable consequential economic burdens.
In 2017, the Bavarian Supreme Audit Office determined that in every third case there were processing deficiencies in the tax administration when dealing with tax cases with permanent losses and possible hobby.
Income tax consequences of the transition from commercial / freelance work to hobby
If a business originally relevant under income tax law is assigned to the hobby from a certain point in time, a transition from the income surplus calculation to the inventory comparison is necessary if the profit was previously determined in accordance with Section 4 (3 ) EStG . However, according to the decision of the Rhineland-Palatinate Finance Court of September 23, 2014, the resulting transitional profit is only taxable at the time of the actual abandonment or sale of the business .
literature
- Zenthöfer, Schulz zur Wiesche: income tax (= blue series ). 10th edition. Schäffer-Poeschel-Verlag, Stuttgart 2009, ISBN 978-3-7910-2826-2 .
Individual evidence
- ↑ BFH of November 15, 1984, Federal Tax Gazette. II 1985, p. 205; Full text .
- ↑ Zenthöfer / Schulz zur Wiesche, income tax (blue row), p. 461
- ↑ StBp 08.19 - The tax audit, p. 251 & 253; Full text .
- ↑ App, Michael, On the scope of the provisional tax assessment according to § 165 AO, DStR 94, 127
- ^ Seer, Roman in: Tipke / Kruse, AO / FGO, § 165 AO, Rn. 8 with reference to BFH BStBl. 90, 278, 280; 09, 335, 337.
- ↑ Bavarian Supreme Audit Office, Annual Report 2017 part no. 32 full text
- ↑ FG Rheinland-Pfalz, judgment of 23 September 2014, Az. 3 K 2294/12, full text , EFG 2015, 11-14, revision admitted to the BFH;
