jump to main content
Tax
12. Jun 2026

VAT exemption for educational services - Broadened scope of application with advantages and disadvantages

The German legislature significantly broadened the VAT exemption for educational services via the 2024 Annual Tax Act. The new rules may extend far beyond traditional educational institutions and, in the future, may also apply to companies that carry out a range of continuing professional education courses only as a supplement to their actual business activities. While this may sound positive at first, there are nevertheless significant tax implications that could also have negative consequences.

Broadened scope of application of the VAT exemption

The revision of Section 4 no. 21 of the VAT Act (Umsatzsteuergesetz, UStG) resulted in a considerable broadening of the scope of application of the VAT exemption. Whereas previously only those services that specifically provided preparation for a profession or for public sector examinations were exempt from VAT, now the regulation includes general services in vocational training, continuing professional education courses and vocational retraining. Consequently, in the future, many practice-based training offerings could also fall under the VAT exemption. This could affect, for example, specialist seminars, IT training courses, language courses, communication or management training programmes, as well as specific workshops or lecture events. Even short-term education programmes or one-day events could generally be considered.

The fiscal administration takes a relatively broad view on this matter (cf. Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) circular of 24.10.2025, reference: III C 3 - S 7179/00054/001/094). According to this, even an indirect professional benefit would be sufficient to presuppose a VAT-exempt educational service. Consequently, this has significantly broadened the scope of potentially VAT-privileged services when compared with the Federal Fiscal Court’s previous case law, which had routinely imposed stricter requirements on the specific professional applicability.

Please note

Nevertheless, an official certificate attesting that the legal requirements have been met is still required (cf. PKF notes on the draft version of the aforementioned circular at "Tax exemption for educational services"). The fiscal administration may however also initiate the issuance of such a certificate retroactively, even if the business owner had not originally applied for one.

Practical implications

For affected companies this will give rise to tax and economic consequences. This is because the VAT-exemption likewise would normally lead to the exclusion of input tax deduction for the associated incoming supplies. Consequently, input tax amounts that were hitherto deductible could become a pure cost item. Moreover, in the case of mixed-use services, a complex allocation of input tax may be required pursuant to Section 15(4) UStG.

Furthermore, there may be practical implications for existing tenancy agreements. If, in the future, a property is used in part for tax-exempt educational services, then this could limit the possibility of a let subject to VAT. This could potentially even give rise to economic disadvantages or conflicts with landlords.

At the same time, the new rules could however also offer competitive advantages. In particular, for private customers or recipients of the services who are not entitled to deduct input tax because VAT as an additional cost component would be omitted. As a result, VAT-exempt education programmes could become more economically attractive.

Recommendation

The BMF responded to the far-reaching consequences of the legislative amendment with a transitional provision and, in the aforementioned circular, it provided for non-objection up to the end of 2027. All the same, companies should check now already whether, in the future, certain services could fall under the tax exemption and the implications that this would have, in particular, for pricing, input tax deduction and contract structures.