Value added tax: principle of uniformity of supply

March 13, 2024

Ancillary services share the fate of the main service for VAT purposes. If different tax rates apply to two supplies when viewed in isolation or if a supply is exempt from VAT, the principle of unity of supply means that the main and ancillary supplies are treated in the same way for VAT purposes; in this respect, the VAT treatment of the main supply is decisive. The apportionment principle applied to date - also by the tax authorities - is not applicable. According to ECJ case law, a single economic transaction is not to be divided into separate supplies.

Against this background, the decision of the BFH of 17.8.2023 (case no. V R 7/23) must be observed as a follow-up decision to the ruling of the ECJ of 4.5.2023 (case C-516/21). In the case in dispute, the ECJ had ruled that the rental of a turkey breeding system installed in a stable building is tax-exempt in the same way as the rental of a building if it is an ancillary service, i.e. the rental of the building and operating equipment constitutes a single supply. The ruling is in line with the development of case law. However, it contradicts the current administrative opinion, according to which the rental of business equipment is always taxable, even if it is an ancillary service.


Recommended action: The tax authorities have not yet responded. In practice, it should be checked which cases are affected by this and whether any contractual adjustments need to be made. Currently, there should also be protection of legitimate expectations with regard to input VAT deduction based on the existing administrative regulation. According to the new case law, in such cases it must first be examined whether the letting of land together with the provision of operating equipment constitutes a single supply. If this is the case, the main supply determines the fiscal fate of the single transaction. In the case in dispute, this was the lease of the building, so that the transfer of the operating equipment could not be separated. In practice, however, there may also be cases in which the transfer of the operating equipment is the dominant element.