According to the VAT Directive, and also according to the domestic VAT law, the leasing of immovable properties is generally exempt from VAT.
However, this does not include the leasing of machinery and equipment permanently connected to the property. Nevertheless, the decision of the European Court of Justice in Case C516/21, which had a German reference, contradicted this notion. In this specific case, the subject of the lease was a turkey farm, which the lessor treated as a VAT-exempt transaction, including the feeding conveyor, cooling, heating, and lighting equipment on the premises.
The European Court of Justice stated that the complex nature of the service and the principal and ancillary relationships of the transactions must be examined even in such cases, despite the general principle that the scope of VAT-exemptions should be narrowly interpreted. If the intention of the parties was to lease a complete animal husbandry facility, the leasing of the building’s mechanical and electrical installations cannot be separated from a VAT perspective, and therefore, the whole transaction is VAT-exempt.