(2022)
How are the costs of a fitted kitchen treated?
A fitted kitchen is not considered a single asset but consists of various components that are independent assets. A distinction is made between the sink and cooker on the one hand and the other kitchen elements on the other.
- Sink and cooker are considered non-independent building components required for the building's use as a residence. Therefore, these costs are part of the building's construction costs and are depreciated along with it. If the sink and cooker are replaced, the expenses are maintenance costs and can be fully deducted as advertising costs from rental income.
- The other parts of the fitted kitchen are independent assets. Their purchase costs can be deducted as advertising costs from rental income. If the purchase costs exceed 410 Euro (excluding VAT), they must be depreciated over the expected useful life. If an existing fitted kitchen is replaced with a new one, the purchase costs are not maintenance expenses and therefore cannot be fully deducted. Instead, the new fitted kitchen must be depreciated normally.
Currently, the Federal Fiscal Court has abandoned its previous view and established new rules for the tax treatment of fitted kitchens in rented apartments: sinks and cookers are no longer considered non-independent building parts but are now 'normal' components of the fitted kitchen. The fitted kitchen is considered a single asset and must be depreciated over a 10-year period. This applies both to initial purchases and renewals (BFH ruling of 3.8.2016, IX R 14/15, published on 7.12.2016). The change in case law means a significant disadvantage for landlords: they can no longer immediately deduct individual components of the fitted kitchen, such as electrical appliances valued at less than 800.01 Euro (excluding VAT), as advertising costs. Instead, the entire fitted kitchen must be depreciated over 10 years, so only 10 percent per year can be considered as advertising costs.
It still applies that a fitted kitchen can be considered an essential part of the building in exceptional cases. For this, the fitted kitchen must be firmly connected to the building and cannot be separated without destroying one part or the other. This is assumed "if the fitted kitchen is integrated into the designated space and united with the surrounding building walls (side walls and back wall)." In this case, the purchase costs are added to the building construction costs and depreciated at 2% per year; the costs for a renewal are considered maintenance expenses and can be fully deducted as advertising costs immediately (BFH ruling of 1.12.1970, VI R 358/69).
