# VAT on Let Business Equipment > The BMF adopts the new case law on VAT for let business equipment and provides transitional rules through the end of 2026. Source: https://www.mtrlegal.com/en/vat-on-let-business-equipment/ · Language: en · Updated: 2026-10-26 --- The Europäische Gerichtshof (CJEU, Court of Justice of the European Union) established key principles governing the VAT treatment of [business equipment let together with a property](https://www.mtrlegal.com/wiki/betriebsvorrichtungen/) (CJEU, judgment of 4 May 2023 – C-516/21). In the subsequent proceedings, the Bundesfinanzhof (BFH, Federal Fiscal Court) changed its previous case law ([BFH, decision of 17 August 2023](https://www.bundesfinanzhof.de/de/entscheidung/entscheidungen-online/detail/pdf/STRE202310167?type=1646225765) – V R 7/23 (V R 22/20)). The Bundesministerium der Finanzen (BMF, Federal Ministry of Finance) incorporated this change in case law into the Umsatzsteuer-Anwendungserlass (UStAE, German VAT Application Decree) in its circular of 19 October 2026 – III C 3 - S 7168/00035/001/102. ## New VAT Assessment of Business Equipment Under the revised case law, the provision of business equipment may, as an ancillary supply, share the VAT treatment of the VAT-exempt letting or leasing of immovable property. This requires a single economic supply in which the provision of the property constitutes the principal supply and the provision of the business equipment is inseparably linked to it. Accordingly, § 4 Nr. 12 Satz 2 UStG (German Value Added Tax Act) must not be interpreted as meaning that, in such a scenario, the letting of business equipment together with the property is necessarily subject to VAT. If the provision of the business equipment is merely ancillary to the VAT-exempt letting or leasing of the property, it receives the same VAT treatment as the principal supply. ### BFH Abandons Previous Case Law The Bundesfinanzhof dismissed as unfounded the tax office’s appeal on points of law against the judgment of the Niedersächsisches Finanzgericht (Lower Saxony Fiscal Court) of 11 June 2020 – 11 K 24/19. The tax office was ordered to pay the costs of the appeal proceedings. In its decision, the Bundesfinanzhof expressly abandoned its division’s previous case law established in the judgment of 28 May 1998. The proceedings had been preceded by the [Bundesfinanzhof’s request for a preliminary ruling](http://www.rechtsprechung-im-internet.de/jportal/portal/t/ppg/page/bsjrsprod.psml?doc.hl=1&doc.id=STRE202110154&documentnumber=1&numberofresults=1&doctyp=juris-r&showdoccase=1&doc.part=L¶mfromHL=true) of 26 May 2021 – V R 22/20. ## BMF Adopts the Revised Criteria Until now, the tax authorities had always treated the letting and leasing of business equipment as subject to VAT. In light of the case law of the highest courts, the BMF no longer adheres to this absolute distinction between the VAT-exempt provision of immovable property and the necessarily taxable provision of business equipment. The new principles also apply to the intermediate letting of sports facilities and to the provision for use of other facilities equipped with business equipment. In each case, the decisive questions are whether there is a single supply for VAT purposes and which element is to be regarded as the principal supply. The BMF published its 105-kilobyte circular on 19 October 2026 under the title “VAT Exemption for the Letting and Leasing of Business Equipment.” BFH decision V R 7/23 (V R 22/20) is to be published in the Bundessteuerblatt Teil II (Federal Tax Gazette, Part II) at the same time as the circular. ### Development from the Draft to the Final Circular The final BMF circular was preceded by a draft circulated for comments on 18 November 2025 under reference number III C 3 – S 7168/00035/001/026. In that draft, the non-objection rule was still limited to transactions carried out before 1 January 2026. By contrast, the final circular extends it to transactions carried out before 1 January 2027. The Bundessteuerberaterkammer (Federal Chamber of Tax Advisers) submitted comments on the draft on 10 December 2025. It criticised the fact that, while the draft addressed the provision of business equipment, it did not address the effects of other services provided by the lessor on the assessment of whether there is a single supply. The Bundesverband Großhandel, Außenhandel, Dienstleistungen e. V. also stated its position on the proposed rules on 12 February 2026. ## Application to Pending and Earlier Transactions The principles set out in the BMF circular must be applied in all pending cases. However, the circular contains a non-objection rule for transactions carried out before 1 January 2027. Accordingly, no objection will be raised if the parties mutually agree to continue applying the version of the Umsatzsteuer-Anwendungserlass in force until 19 October 2026. This also applies to the associated input VAT deduction. ## Amendments to the Umsatzsteuer-Anwendungserlass The BMF is amending several sections of the Umsatzsteuer-Anwendungserlass. The amendments focus on the distinction between principal and ancillary supplies and on the VAT treatment of buildings, sports facilities and other facilities containing business equipment. In particular, the amendments concern: - the general principles governing single supplies, - the scope of the VAT exemption for the letting of immovable property, - ancillary supplies at campsites, - the provision of buildings containing business equipment, - the VAT treatment of complete sports facilities, - other facilities, such as event venues, and - the allocation of consideration in the case of single supplies. ### Ancillary Supplies Generally Follow the Principal Supply Abschnitt 3.10 UStAE clarifies that, as a rule, an ancillary supply receives the same VAT treatment as the principal supply. The special assessment of accommodation transactions remains unaffected. When determining whether there is a single supply, the tax authorities consider the perspective of the average consumer and the economic substance of the transaction. The formally separate disclosure of individual supply components is therefore not, by itself, decisive for their classification for VAT purposes. ### Fixtures and Furnishings Let with the Property Abschnitt 4.12.1 Abs. 3 UStAE confirms that the VAT exemption for the letting of immovable property generally also extends to fixtures and furnishings let with the property. The movable inventory of a care home for older people is cited as an example. The provision is linked to the revised Abschnitt 4.12.10 UStAE concerning the letting and leasing of business equipment. The decisive question remains whether the items form part of a single supply and are merely ancillary to the provision of the property. ### Utility Connections at Campsites For campsites, Abschnitt 4.12.3 Abs. 3 UStAE clarifies the treatment of water points and wastewater and electricity connections. These may remain ancillary to the provision of the property even if they are supplied separately to individual users. ### Buildings Containing Business Equipment The revised Abschnitt 4.12.10 UStAE primarily addresses the letting and leasing of buildings containing business equipment. The tax authorities recognise that the provision of the property and the provision of the business equipment may constitute a single supply. This may be the case, for example, with sports facilities. The assessment is governed by the general criteria set out in Abschnitt 3.10 UStAE. By contrast, the letting of a building with a rooftop photovoltaic installation is to be treated as comprising two separate supplies. ## Special Assessment of Sports Facilities Under Abschnitt 4.12.11 UStAE, where an entire sports facility is provided, the general principles must be applied to determine whether there is a single supply. If there is, it must then be determined whether the provision of the property or the provision of the business equipment constitutes the principal supply. ### Provision of the Property as the Principal Supply The provision of the property constitutes the principal supply if the business equipment merely serves as a means of enabling the property to be used under optimal conditions. In this case, the single overall supply is exempt from VAT. This may apply in particular to multipurpose halls where the principal focus is on using the facility for sports regardless of weather conditions and on the use of changing rooms and sanitary facilities. ### Business Equipment as the Defining Component of the Supply If complex business equipment is the defining element for the facility’s intended use, it generally constitutes the principal supply. The single overall supply is then subject to VAT. The Umsatzsteuer-Anwendungserlass cites the following examples: - swimming pools, - indoor climbing centres, and - golf courses. An allocation between a VAT-exempt provision of property and a taxable provision of business equipment should be made only in exceptional cases. ## Other Facilities and Event Venues Abschnitt 4.12.11 UStAE also covers other facilities containing business equipment, including event venues. Whether there is a single supply and which component constitutes the principal or ancillary supply must be assessed from the perspective of the average consumer. The intended use, the contractual documents and the equipment of the facility in question are particularly relevant to this distinction. ## Allocation of Consideration Abschnitt 10.1 Abs. 11 UStAE is also clarified. In the case of a single supply, the consideration must continue to be allocated only if different taxation regimes apply to individual components. The tax authorities cite cross-border passenger transport as an example. By contrast, the mere fact that a single supply comprises several factual elements does not automatically result in an allocation of the consideration. ## Significance for Letting and Lease Arrangements The revised provisions bring an end to the previously strict distinction between the VAT-exempt provision of immovable property and the necessarily taxable letting or leasing of business equipment. The decisive factors are now the economic unity of the transaction and the relationship between the principal and ancillary supply. The VAT classification may therefore depend to a significant extent on the intended use, the equipment and the contractual structure of the letting or lease arrangement. For legal issues concerning the new administrative principles and their significance for existing contractual relationships, MTR Legal advises companies, investors and private individuals as part of its [tax law advisory services](https://www.mtrlegal.com/rechtsberatung/steuerrecht/). ECLI: DE:BFH:2023:B.170823.VR7.23.0