No anticipated advertising costs for "eternal renovation"

Costs and expenses that are incurred even before the generation of taxable revenues can nevertheless constitute advertising costs. The prerequisite for the existence of such anticipated advertising costs is that circumstances arise that go beyond the mere declaration of intent to generate future revenue and become clearly apparent to the outside world. The serious intention to generate future revenue must be firmly established based on binding agreements or other circumstances beyond the declaration of intent. If such circumstances are initially present, however, they disappear later, then no advertising cost deduction is possible anymore from the moment they disappear.

In connection with future income from rental and leasing, the EStR allows, for example (Rz 4035), tax credits for the purchase of the land, public taxes from the time the property is acquired until the building is completed, or the AfA from the provision of the property for rental until the effective rental as pre-determined advertising costs. Accordingly, for buildings used for rental purposes, the AfA is not calculated from the actual transfer to the tenant until the property is actually made available (since in the case of buildings, the purely age-related wear and tear takes precedence).

The BFG had (GZ RV/5100117/2023 dated 14 April 2025) investigated the case in which a property was purchased and a loan was taken out in addition to the purchase price. Before the planned rental, a comprehensive renovation was also planned – specifically, two apartments on the upper floor and commercial premises on the ground floor were to be built and subsequently rented out. However, after initial small renovations in the first four years, the project stopped in 2015 due to disagreements with the owners of the neighboring property. Since then, no significant construction work has been carried out and the building was a bare structure without windows and doors, without interior renovations and installations, etc.

Nevertheless, negative income from rental and leasing activities was declared in the tax return, which was not recognized by the tax authorities (due to the lack of recognition as a source of income). In its decision, the BFG emphasized that the examination of whether anticipated advertising costs are present is conceptually subordinate to the assessment of the taxpayer’s personal use of the property. Accordingly, it cannot be concluded with certainty that a conversion or building renovation constitutes a decision to rent the property in the future. However, the taxpayer’s clear and unambiguous decision to rent the property must be made known to the outside world; the achievement of actual income, however, is not a prerequisite for the consideration of anticipated advertising costs. Due to the taxpayer’s lack of discernible serious rental intentions – due to the "eternal renovation" of the building – the BFG had no anticipated advertising costs, so no negative income from rental and leasing could be claimed tax-deductible.

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