Tax authorities accept that delivery of electricity is part of (VAT-exempt) long-term lease

The Federal Tax Court (BFH) held on 15 January 2009 that the delivery of electricity by a landlord is part of a (VAT-exempt) long-term lease. While, in the case concerned, the Court had to decide on the appropriate tax treatment of the delivery of electricity by a campground operator to the permanent campers, the rule should apply in general to VAT-exempt leases, e.g. residential leases where the landlord provides the electricity. The tax authorities have abandoned their earlier position on this matter and adopted the new principles on 21 July 2009. As a consequence, input VAT paid in connection with the purchase/production of the electricity is no longer creditable.