BMF narrows protection for Organschaft intra-group VAT exemptions
Germany’s Federal Ministry of Finance (BMF) has updated the VAT treatment of German VAT Groups (Organschaft) following recent CJEU and BFH case law. A new 1 April 2026 BMF letter amends the VAT Application Decree (UStAE) and expands situations where intra-group transactions may trigger VAT consequences.
Previously, supplies between VAT group members were broadly treated as non-taxable internal transactions. The new guidance confirms this treatment no longer fully applies where supplies are connected to non-economic or non-business activities.
Non-business use now under scrutiny
The changes particularly affect:
- holding companies;
- public sector entities;
- universities and hospitals; and
- partially exempt businesses.
The BMF states that intra-group supplies used for non-economic activities may now impact VAT recovery and deemed supply rules. New examples have been added to the UStAE, including staff-related landscaping services.
Separate guidance is still expected on cross-border VAT groups following the Skandia and Danske Bank CJEU rulings.
Although the revised rules apply to open cases immediately, taxpayers may continue using the previous administrative approach until 31 December 2026 without challenge from the tax authorities.
Businesses should now reassess intra-group charging models, input VAT recovery and ERP tax logic for German VAT groups.
Read more in our German VAT country guide.
Organträger German VAT Group regime
Germany’s VAT grouping system, known as “Organschaft,” allows multiple legally independent entities to be treated as a single taxable person for VAT purposes, provided they are closely linked financially, economically, and organisationally. This structure aims to simplify VAT administration and eliminate VAT on intra-group transactions.
- Controlling Entity as Taxable Person: In Germany, the parent company (Organträger) is designated as the sole taxable person for the VAT group. This approach has been upheld by the European Court of Justice (ECJ) as compliant with EU VAT directives
- Financial Integration Requirements: German law traditionally required the controlling company to hold both a majority shareholding and majority voting rights in the subsidiaries. However, the ECJ ruled that this requirement is too stringent and not mandated by EU law. A majority shareholding alone may suffice for financial integration, provided the controlling company can impose its will on the subsidiaries .
- Intra-Group Transactions: Services exchanged between members of a VAT group are generally not subject to VAT, even if the recipient cannot deduct input VAT. This principle was affirmed by the ECJ in the case of Finanzamt T II, providing clarity on the VAT treatment of intra-group services .
