BMF circular letter on operating facilities

Background

Under Section 4(12), second sentence, of the German Value Added VAT Act (UStG), the letting or leasing of machinery and other facilities of all kinds forming part of an operating installation (operating facilities) is not exempt from VAT, even if they constitute essential components of a piece of real estate.

In connection with the letting of a turkey house, the Federal Fiscal Court (BFH) therefore had to decide whether the letting of the operating facilities was excluded from the VAT exemption even if it constituted a dependent ancillary service to the letting of the turkey house. This concerned an industrial conveyor spiral for feeding the turkeys and a ventilation and lighting system designed to ensure a temperature and level of illumination appropriate to the animals’ stage of development. The ECJ ruled (C-516/21 of 4 May 2023) that the question of VAT exemption depends exclusively on the principal supply where the provision of the operating facilities constitutes an ancillary supply.

The Federal Fiscal Court (BFH) ruled accordingly in its subsequent decision (V R 7/23 of 17 August 2023).

Letter from the Federal Ministry of Finance (BMF) dated 19 October 2026

The Federal Ministry of Finance (BMF) endorses the findings of the ECJ and the Federal Fiscal Court (BFH) and no longer adheres to the principle of split-up previously set out in the VAT Guidelines (UStAE). Accordingly, Section 4(12), second sentence, of the Value Added VAT Act (UStG) no longer applies to the letting and leasing of operating facilities where this constitutes an ancillary service to the letting of real estate as the principal service, or where it forms part of a complex service. In this context, the question whether the supply constitutes a single supply must be assessed in accordance with general principles. If the operating facilities merely constitute the means by which the piece of real estate is utilised under optimal conditions, the letting of the real estate is the principal supply. However, there may also be cases in which the operating facilities, rather than the piece of real estate, constitute the principal supply, e.g. in the case of a swimming pool or a climbing centre. In such cases, the supply is VAT taxable in its entirety. It is also conceivable that there may be several principal supplies to be assessed independently, such as the letting of a building in conjunction with a so-called rooftop photovoltaic system. The decisive factor is always the perspective of the average consumer.

The BMF circular is, in principle, to be applied in all pending cases; however, for transactions carried out up to the end of 2026 – including for the purposes of input VAT deduction – no objection will be raised if the parties involved unanimously apply the version of the UStAE valid up to 19 October 2026.

Practical guidance

Businesses that let or lease land with operating facilities should review existing and new contracts to determine whether a single supply (as a complex supply or as a principal/ancillary supply) exists, or whether there are two or more separate supplies. The fact that businesses are required to put themselves in the position of an ‘average consumer’ when making this assessment complicates matters, as essentially no one knows exactly who that actually is. Operating owners must live with the risk that the relevant VAT office may have a different conception of the average consumer and reach a different conclusion.

Once a conclusion has been reached, the following diagram can clarify the VAT treatment:

• Multiple independent supplies: The letting of the property and the provision of the operating facilities must each be assessed separately for VAT purposes.
• A single supply with the letting of real estate as the principal supply or the defining element of a complex supply: If the provision of operating premises is merely an ancillary supply, it generally follows the VAT treatment of the letting of land.
• A single supply involving the provision of operating facilities as the main supply or a defining element of a complex supply: the supply is VAT taxable in its entirety.

If the previous VAT treatment changes, this will have implications for input VAT deduction and for correction obligations under Section 15a of the German VAT Act (UStG). 

Author: Nadia Schulte