What does the renovation of the office cost?

Production costs: conversion of an open-plan office into individual offices

FG Düsseldorf, judgment of 17.6.2005, 12 K 7052/03 F (revision at the BFH, Az: IX R 39/05)

The insertion of partition walls represents an increase in substance if it promotes the rentability of a building. The conversion costs are therefore to be treated as subsequent costs for the production of an asset.

[Principle d. Red.]


Practice info!



An open-plan office was converted into four independently usable individual offices by installing Rigips partition walls in lightweight construction. At the same time, the electrical installation was renewed. This should ensure that the rooms can be rented commercially. The owner claimed the costs incurred as an immediately deductible maintenance expense. Following an external tax audit, the tax office declared these expenses as production costs that could be capitalized.



In the opinion of the tax court, the installation of the Rigips walls in the present case does not represent a change in the function or nature of the building floor concerned extension, in fact

  • by inserting previously non-existent components into the building (increase in substance) and
  • through long-term expansion of the building's usage options.

It is irrelevant whether the subsequent installation of the partition walls requires comparatively little structural effort (without recalculating the statics). In contrast to an open-plan office structured by simple room dividers, these rooms offer, in addition to a separate entrance, the optical, acoustic and power supply-specific individuality that is essential for renting out to different tenants.

In the opinion of the court, the amount of the costs for the conversion of a partial floor (in the case of dispute only approx. 15,000 €) is not a criterion for whether there are manufacturing or maintenance costs.

An associated increase or decrease in rental income is irrelevant; they have no influence on the expansion of the possibilities for use.

The case would have to be assessed differently if the renovation work had involved avoiding damage to the building.


Practical note:

The FG judgment is in Contrary to the BFH decision of October 21, 2005 (IX S 16/05, NV, here). Then comes with one Installation in existing facilitiesManufacturing effortjust at a substantial improvement into consideration â € “the (minor) expansion associated with the installation is therefore only a secondary feature.

Expenses for a pure remodeling of rented rooms by laying and removing partition walls are afterwards Not qualify as (subsequent) production costs, as long as the newly added building parts do not give the building as a whole the structural character, e.g. if they replace used parts that are decisive for the useful life.

If the construction measure is only beneficial for rentability, therefore - contrary to the opinion of the FG - Not Manufacturing costs are assumed. In the opinion of the BFH, this only comes into consideration if the construction measures (e.g. as part of a renovation) lead to a Function and character change of the object.


[Note d. Red.]

BC 8/2006