Educational services: BMF circular dated 24 October 2025

Brief overview: The new legal regulations

Public institutions entrusted with tasks directly related to schooling and education were included as service providers in the VAT exemption under § 4 No. 21 letter a UStG.

The scope of the services eligible for exemption was extended to include school education, university education, training, further education and vocational retraining. A certificate for these services, which are provided by public institutions, private schools and other general or vocational training institutions, is still required. However, the content of this certificate is different than before. According to the pure wording of the law, educational institutions would initially be without certification from 1 January 2025.

There is now a separate exemption for private teachers.

The most important statements in the BMF letter

Among other things, the BMF addresses the following BFH (German Federal Fiscal Court) rulings on the subject of educational services:

• Retraining lessons provided by private teachers are not VAT exempt (only school and university education).
• Teaching services at private schools and other general or vocational educational institutions must be provided personally by a self-employed teacher – not by a self-employed lecturer commissioned by the teacher.
• Swimming lessons may be VAT exempt if they are provided by private teachers, but not by swimming schools.
• Driving lessons at a driving school do not fall under the term "school and university education".

In addition, the Federal Ministry of Finance interprets the new regulation as follows (selection):

• The services referred to in § 4 No. 21 sentence 1 letter a and letter b UStG that serve educational and training purposes include school lessons, university lessons, training, further education and vocational retraining (educational services) as well as closely related supplies of goods and services. Supplies that not only enable but also bring about the purpose of schooling and education directly serve this purpose. Interactive live streams are also included. If a recording is made available without separate remuneration, this is an ancillary service to the educational service. Courses and streaming services that are approved under the Distance Learning Act automatically qualify as educational services.
• According to the definition of the European Court of Justice, school and university education must be designed to cover a broad range of subjects, so that the teaching of specialist knowledge is not exempt in principle. However, teaching individual school subjects is still eligible for VAT exemption under certain conditions, as is, for example, job application training for school pupils. However, this does not include specialised, one-off lessons and services where the focus is on the opportunity to play sports with others.
• Self-employed teachers who teach at schools and universities on a freelance basis must provide confirmation from the institution that they work at a school, university or institution within the meaning of § 4 No. 21 sentence 1 letter a UStG. If the institution serves various educational purposes, it must be proven that the activity is carried out in a privileged area. For certain, exhaustively listed institutions, confirmation is not required.
• Private teachers providing school and university tuition within the meaning of the newly introduced exemption in § 4 No. 21 letter c UStG provide their services in person, on their own account and on their own responsibility. Subcontractors are therefore excluded. Examples include private tutors and music teachers. Unlike freelancers at a university, they do not need a certificate from the state authority, but they must have the relevant professional and pedagogical qualifications. The definition of a private teacher is not fulfilled if the company has structures similar to those of a school.
• Everything that is permitted under the Distance Learning Protection Act is automatically considered an educational service.
• Courses for purely recreational purposes are not eligible.
• Public institutions are eligible if they are entrusted with educational services based on relevant legal provisions.
• Certificates issued by the competent state authority by the end of 2025 with the wording of the old version of the law (and thus, strictly speaking, according to different criteria) remain valid.

The BMF circular dated 24 October 2025 applies to transactions from 1 January 2025 onwards. Entrepreneurs can still refer to certain sections of the old version of the UStAE until the end of 2027. Swimming lessons may be treated as VAT exempt until 2027. Differentiated application rules apply regarding the case law of the BFH.

Impacts

The inclusion of retraining broadens the scope of VAT exempt services (for which no opting out is provided). This can lead to the easily overlooked consequence that landlords can no longer rent to the educational institutions concerned on a VAT exempt basis.

With regard to the transitional rule, it should be noted that the tax courts are not bound by it, i.e. in legal proceedings, the tax court has the right not to apply the transitional rules that have been invoked.

It is particularly critical that all services approved under the Distance Learning Protection Act are automatically considered educational services, especially since the Federal Court of Justice (BGH) has recently expanded the definition of distance learning to an extreme degree. The State Central Office for Distance Learning (ZFU) grants approval according to criteria that are completely different from those that apply to VAT exemption. For example, the ZFU's course search also includes the category "hobby", although courses for purely recreational purposes are not eligible for VAT exemption under VAT law.

Author: Nadia Schule