Catering, an alarm system, and the use of St. Pauli storefront windows: this is more than just renting a room to prostitutes. According to Finance Court, this “all-around carefree bundle” requires the payment of sales tax.
If prostitutes are provided services other than renting Steigen rooms, the rental is no longer VAT-free. The transfer of use has lost its tenancy character. The Finance Court (FC) Hamburg decided on this (decision of May 17, 2022, Art. 2 Paragraph 9/20).
A renter in St. Pauli has filed a lawsuit. Two are in the “restricted area,” where prostitution is permitted between the hours of 8 p.m. and 6 a.m., and one is in a zone with no limitations on prostitution at all.
The guy rented out individual apartments in the so-called “staircases” to prostitutes who performed sexual services there in exchange for “daily rent.”
Previously, the guy from this transfer of use declared sales taxable profits. However, the Federal Fiscal Court (FFC) declared in 2015 that renting rooms at a so-called hourly hotel for half an hour is VAT-free.
That is what the gentleman was talking about.
Passive rental performance limit exceeded
The tax office, on the other hand, maintained that, in addition to rooms, an “all-round carefree package” was given for the prostitutes, which exceeded the limitations of passive rental services. As a result, sales tax must also be paid.This view is now on the Finance Court as well. Aside with supplying the accommodations, the landlords looked after the prostitutes at the man’s request and guaranteed their safety.
Furthermore, by renting the Steigen rooms, the prostitutes would be permitted to obtain customers in the Steigen’s public spaces as a “customary right” while excluding other prostitutes who are “unrelated to the Steigen.”
They might even use the storefront windows in a property. According to the court, the guy also supplied other services such as an alarm system, video monitoring and catering, which exceeded the bounds of a passive landlord service.
The transfer of usage has taken on a brothel-like quality.
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