Taxability of Compensation for Spanning Power Supply Line over one's Real Estate

The Federal Fiscal Court had to decide on the question whether the compensation in return of permitting an high-voltage power line crossing the property is subject to income tax or not. BFH's decision is of July 2, 2018 (re IX R 31/16).

Taxability of Compensation for Spanning Power Supply Line over one's Real Estate

High-Voltage Power Line spanned over Real Estate

In the dispute, the taxpayer was the owner of a property over which a high voltage power line was spanned. The network provider requested to install a stand for high voltage power line on the taxpayer's property. The offer was accepted. According to the agreement, the right of installment was to be secured by entry of this right and a financial compensation for permitting the property to be overrun. The amount of the compensation was calculated in relation to the market value of the spanned-over land to real estate not burdened with a power line. With the tax office, it came to a dispute over whether the compensation paid was taxable.

No income from renting and leasing

The BFH gave the taxpayer the right. In the opinion of the court, this income is not taxable income. It is not income from letting and renting, because it does not remunerate the temporary possibility of the use of the property, but rather the indefinite real encumbrance of the property with a servitude and thus the abandonment of an ownership component. The use of the property was not restricted by the agreement.

No Income from other Services

The court also saw no income from other services. This type of income would not cover transactions that constitute divestment or divestment-related transactions in the private sector. Moreover, the taxpayer would have probably been forcibly expropriated if he had not agreed to the high-voltage towers on his property. Anyone who anticipates his imminent expropriation does not provide services in the sense of tax law.

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