No More Fictitious Interest – Federal Fiscal Court Exempts Interest-Free Installment Payments on Personal Assets from Income Tax

In its ruling of March 24, 2026 (VIII R 30/24), the Federal Fiscal Court (BFH) departs from its decades-long case law: Interest-free deferral agreements in the private sphere are to be recognized for tax purposes; the installments are not split into interest and principal components. Furthermore, the BFH also ruled out the interest benefit being treated as a gift subject to gift tax.

The decision strengthens the freedom of contract under civil law and opens up new options for structuring asset transfers within the family—ranging from real estate sales and GmbH shares to claims for the statutory share of an estate and claims for equalization of accrued gains.