Court case IX R 6/23 – Court Ruling (Germany, 2024)

The parties involved are in dispute about the fact that the German tax office requires a copy of the rental agreements from the landlady (taxpayer) as part of an income tax return. The landlady is the data controller, the tenants are the data subjects and the tax office would be the recipient of the data. In the income tax returns for 2018 and 2019, the controller submitted her statements of the total rental income, depreciation, administrative and maintenance expenses for the respective property for its income from letting and leasing various properties. The tax office requested a copy of the rental agreements, service charge settlements and on claimed maintenance expenses from the controller. The controller submitted the gross and net rental income with the names of the tenants blacked out as well as the operating costs for the various apartments and documents on the maintenance expenses, but not the requested copies of the rental agreements and maintenance expenses. The data controller argued that the disclosure of the requested documents was not possible without the consent of the data subjects. Furthermore the tax office was not entitled to request the documents, as the rental agreements were not required to check the actual income. The tax office responded with a request for the rental agreements in question, referring to the duty of cooperation of the controller under the German Fiscal Code (Abgabenordnung - AO). The documents are necessary for the verification of the income data submitted by the controller. The tax office rejected an objection on its decision by the controller as unfounded and repeated the obligation to cooperate according to AO. The duty to cooperate includes in particular the complete and truthful disclosure of the facts relevant to taxation and the provision of evidence. The tax office may, at its own discretion, determine which evidence it deems necessary within the meaning of the relevant section of the AO. The tax office requires the names of the tenants and the respective rental agreements to verify the tax-relevant circumstances. The GDPR does not prevent the fulfillment of the obligations to cooperate, as the controller is entitled to transfer the personal data contained in the contracts for the purpose of fulfilling these tax obligations in accordance with Article 6(1)(c) GDPR. The Fiscal Court Nuremberg (Finanzgericht Nürnberg - FG Nürnberg) dismissed a legal action brought by the controller. The Federal Fiscal Court dismissed the appeal as unfounded. The Fiscal Court Nuremberg correctly assumed that the tax office was entitled to request the rental agreements from the data controller. The rental agreements are documents that can be requested for inspection by the tax office in accordance with § 97(1) AO. The request to submit the document is an administrative action within the meaning of § 118 AO. The court considered the tax offices request for the documents to be a discretionary decision by the administration. This disclosure of documents is subject to the principle of proportionality, i.e. it must be suitable and necessary to clarify the facts, the fulfillment of the obligation must be possible for the person concerned and the use must be necessary, proportionate and reasonable The court held that the tax office needed the rental agreements to check the tax-relevant circumstances and that these represented a suitable means. The rental agreements would contain tax-relevant information e.g. amount of the agreed rent, rent increases, the composition of the rent, the scope of the right of use and the actual implementation of the rental. The tax office had no other equally effective means of clarification. The income tax returns and income documents of the data controller were insufficient as a means of control, as they are prepared without the involvement of the tenants. Personal data of the tenants are required in order to be able to allocate the payment flows to the respective tenancy. The tenants data in the rental agreements are personal data pursuant to Article 4(1) GDPR and the disclosure by the data controller constitutes a data processing operation pursuant to Article 4(2) GDPR. It was also possible for the controller to disclose the tenants data because she is entitled to do so under Article 6(1)(c) GDPR in conjunction with § 97 AO. Accordingly, the court held that data processing by disclosing the rental agreements to the tax office is considered lawful if it is necessary for the fulfillment of a legal obligation to which the controller is subject. In this case, the court considered this legal obligation to be based on § 97 AO. The subsequent data processing by the tax office is also lawful, as § 29(b) AO allows the processing of personal data by the tax authority if it is necessary for the exercise of public authority. The court found that Section 29(b) AO is the national legal basis for data processing in conjunction with Article 6(1)(e) GDPR.