Input tax deduction for supply of tenant electricity (BFH ruling of 17 July 2024 - XI R 8/21)

October 14, 2024

The supply of electricity that the landlord of residential property generates himself via a photovoltaic system and supplies to his tenants in return for payment is not an ancillary service of the VAT-exempt (long-term) rental of residential property, but an independent taxable supply subject to VAT, which entitles the tenant to deduct input tax from the incoming supplies, since the tenant is legally entitled to choose the electricity provider freely and the electricity supply is billed separately and according to individual consumption.

The BFH itself delimits the judgment from its judgment of 7 December 2023 (V R 15/21). The supply of heating does not entitle the tenant to deduct input tax, since the tenant was also contractually obliged to supply heat and hot water, and this therefore constitutes an ancillary service.