A ranking regime applies in the income tax sphere enabling the determination of how to earmark tax benefits as taxable income where the benefit in question could in principle be involved in taxation in more than one way. According to the ranking regime, a tax benefit is allocated to the foremost chapter of the law to which it could be allocated. Earnings from operations in a statutory sense take precedence over result from other operations and over taxable income from savings and/or investments. The first question to be addressed is therefore that of whether a particular benefit forms part of earnings from operations or, if not, of result from other operations or, if not, of income from savings and/or investments.
A business venture is an ongoing organisation of capital and labour which participates in the public production process with the aim of generating a profit. The scope of labour as a factor may be relevant to the distinction between profit from operations and income from savings and/or investments. The possession and administrative management of assorted immoveable properties does not in principle qualify as a business venture.
A holiday cottage owner had included the several properties he purchased in 2004 under box 3 (“taxable income from savings and/or investments”) from the date of acquisition onwards, then went on with effect from 1 January 2008 to earmark his operation of the cottages as a business venture. The District Court ruled that there were no special circumstances warranting the requalification of the properties, nor was there any question of requalification to operating capital as the owner’s status had not changed. The owner both in 2008 and in previous years had used the services of a rental agency to let the holiday cottages. The operations which the owner had taken on with effect from 2008 had not come about as a result of his ownership but rather, as that of his family ties with the director cum shareholder of the rental agency.