17. February 2026
BayLfSt: Tax treatment of family cooperatives
The Bavarian State Tax Office (BayLfSt) has issued a statement on the tax treatment of family cooperatives.
The Idea
The idea behind the establishment of so-called family cooperatives—frequently promoted by financial influencers—is to achieve tax deductibility of members' private living expenses through the cooperative's purpose.
Section 1, Paragraph 1 of the German Cooperative Societies Act (GenG) requires the promotion of the cooperative's members' economic interests or their social or cultural well-being.
Expenses related to private living benefit the cooperative's members and, according to taxpayers, should be considered for income tax and value-added tax purposes at the cooperative level. Consequently, expenses for vehicles, weekend trips, spa visits, vacations, restaurant meals, clothing, veterinary costs, driving lessons, motorboats, real estate construction, saunas, or swimming pools have been claimed as tax-deductible expenses, and input tax credits have been claimed from these invoices.
The Bavarian State Tax Office's Position
In a letter dated February 17, 2026, the Bavarian State Tax Office clarified that—subject to individual review—expenses for members' private living expenses constitute hidden profit distributions. Hidden profit distributions within the meaning of Section 8 Paragraph 3 Sentence 2 of the German Corporation Tax Act (KStG) exist in the case of a cooperative if contributions do not correspond to the cooperative's joint business operations.
For VAT purposes, expenses that serve the private benefit of the members of a family cooperative are considered to be outside the business, thus precluding input tax deduction.
The letter from the Bavarian State Tax Office (BayLfSt) dated February 17, 2026, can be accessed here: https://www.lfst.bayern.de/fileadmin/RESSOURCEN/INFORMATIONEN/Steuerinfos/Steuerarten/Umsatzsteuer/S_7300.2.1-228_12_St33_vom_17.02.2026.pdf
Practical Implications
Hidden profit distributions may not reduce taxable profits. Family cooperatives that have covered expenses for the private living costs of their members should consider the Bavarian State Tax Office's interpretation of this ruling when filing their tax returns to avoid potential criminal liability. If the members of the family cooperative hold a different legal opinion, this should be asserted through an appeal process.