Tax Implications of Free Heat Supply Between Businesses: Key Legal Insights from BFH Ruling

• The case BFH 04.09.2024 XI R 15/24 addresses VAT on free heat supply between businesses.
• Free supply of self-generated heat from one entrepreneur to another is considered a non-monetary donation subject to VAT.
• The purpose for which the receiving entrepreneur uses the heat does not affect the VAT obligation.
• The plaintiff operated a combined heat and power plant, claiming input tax for its acquisition.
• The plaintiff sold electricity to the grid but provided heat for free to two businesses: one for drying wood and the other for heating asparagus fields.
• Key rulings from the BFH: 1. Free heat supplied to other businesses is classified as a non-monetary donation under VAT law. 2. The VAT obligation remains regardless of the recipient’s ability to claim input tax deductions. 3. Self-costs for VAT purposes include not only direct production costs but also indirectly attributable costs, regardless of whether they are subject to input tax.

Source: datenbank.nwb.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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