VAT on Sports Clubs: New Structuring Options Following BFH Decision

With its decision published on 13 November 2025, the German Federal Fiscal Court (Bundesfinanzhof – BFH) clarified that services supplied by charitable sports clubs to their members are, as a rule, taxable supplies. As a result, membership fees can in principle constitute consideration for the provision of sporting activities and therefore be subject to VAT.
While the decision triggered a wave of critical media coverage, its core reasoning also opens up attractive structuring opportunities in individual cases. The current – and politically preferred – practice of the German tax authorities, under which membership fees are generally treated as non‑taxable, conflicts with the court’s ruling. Going forward, it may be advantageous for sports clubs, particularly in years with significant capital expenditure on club infrastructure, to deliberately opt for taxability and thereby benefit from input VAT recovery.

Background

The case concerned a charitable sports club which, in 2015, offered various sports and operated its first men’s football team as a commercial business activity. Other sports offered included swimming, table tennis, gymnastics, apparatus gymnastics, dodgeball, running, athletics, dancing and Zumba.
The club built an artificial turf pitch on leased land and received a subsidy from the local municipality. In its VAT return, the club declared revenues from leasing and admission charges as well as from membership fees and applied the reduced VAT rate to all of them. Its reasoning was that the membership fees represented consideration for its services, so it wished to charge VAT in order to secure input VAT recovery on investments such as the artificial turf pitch.
The tax authorities, relying on established administrative practice, including the circular of the Federal Ministry of Finance (BMF) of 4 February 2019 (BStBl I 2019, 115), took the view that membership fees were to be regarded as participation fees for exempt sporting events within the meaning of section 4 no. 22(b) of the German VAT Act (UStG). On that basis, they denied input VAT deduction at least to the extent of the membership fees.

The club objected, arguing that membership fees are not participation fees within the meaning of the VAT Act and that, in particular, there is no clear statutory exemption provision for membership fees.

The Decision

The BFH held that services supplied by a charitable sports club to its members can in principle be subject to VAT. Membership fees are to be treated as consideration for the club’s services – and are thus taxable – where, from the perspective of the average member, there is a specific benefit in return, such as the right to use sports facilities and activities.

In doing so, the BFH expressly contradicted the tax authorities’ administrative practice, which for more than 15 years has departed from the highest court’s case law by treating such services as outside the scope of VAT. The BFH referred to EU law requirements, in particular Article 2(1)(a), (c) of the VAT Directive (MwStSystRL), which does not provide for any special exception for sports clubs. For the court, the decisive factor is that membership fees constitute consideration for access to the club’s offerings, irrespective of whether individual members actually make use of them.

According to the BFH, the exemption in section 4 no. 22(b) UStG applies only to sporting events where active athletes are able to engage in sport by virtue of the club’s organisational measures. Mere making available of sports facilities or unsupervised training without instruction will generally not suffice. What is required is an additional element, such as a qualified organisational framework or the presentation of sporting performances.

The BFH also emphasised that where there is a single composite supply comprising elements of equal importance, and not all elements fall within the exemption, the entire supply may be fully taxable. Due to inadequate findings by the lower court, the BFH set aside the judgment of the tax court (Finanzgericht – FG) and remitted the case. The FG must now examine whether the reduced VAT rate under section 12(2) no. 8(a) UStG is available and whether any additional state aid considerations need to be taken into account.

Implications: New Structuring Flexibility for Sports Clubs

The decision has been received critically in the media. The business daily Handelsblatt went so far as to warn of a looming “tax shock” for sports clubs (Handelsblatt). In response to the judgment, the Federal Ministry of Finance announced that it would review whether to adjust its administrative practice (FAZ). Sports associations such as the German Olympic Sports Confederation (DOSB) and the German Football Association (DFB), as well as political stakeholders, point to the risks of higher VAT burdens for clubs.

However, at least for a transitional period until any new legislation is adopted, the ruling also creates attractive planning opportunities:

First, the decision provides concrete guidance on the long‑standing key distinction between VAT‑exempt “sporting events” and (generally taxable) supplies consisting of making facilities available (see also BeckOK UStG/Reis, 48th ed. 15.3.2026, section 4 no. 22 UStG, paras. 130 et seq.). According to the tax authorities, a sporting event is an organisational measure taken by an eligible entity that enables active athletes to engage in sport. By contrast – as the BFH again underlines – there is no sporting event where the service is limited to the mere provision of sports facilities or equipment, or to isolated services (such as one‑to‑one training without any event character). In those cases, the exemption in section 4 no. 22(b) UStG is ruled out. Second, the judgment highlights the existing gap between case law and tax administration in relation to membership fees. While the tax authorities often exclude membership fees at the level of taxability (treating them as non‑taxable from the outset), the BFH assumes that they generally constitute consideration for services supplied by the club. This divergence effectively creates a choice:

Clubs may, after carefully weighing the consequences, either

• follow the administrative practice and treat membership fees as non‑taxable (with the result that no input VAT deduction is available), or
   
• follow the BFH’s case law and treat them as taxable consideration and – to the extent no exemption applies – as subject to VAT.

In the latter case, clubs gain access to input VAT on investments in club infrastructure (e.g. construction or refurbishment of pitches, halls or other facilities).

Against this backdrop, the requirements of Article 132(1)(m) of the VAT Directive take on particular importance. Under EU law, the exemption is not tied to the narrow concept of a “sporting event”; instead, it covers “certain services closely linked to sport or physical education”. The BFH has, however, abandoned its earlier case law which allowed businesses in the sports sector to rely directly on this provision, for example to treat the mere making available of sports facilities as VAT‑exempt.
In line with the current approach of the Court of Justice of the European Union (CJEU) and the BFH, the national legislature enjoys a margin of discretion in this area, although this must be exercised in conformity with EU law principles. The German legislator has clearly chosen to limit the exemption to sporting events within the meaning of section 4 no. 22(b) UStG. For sports clubs, this means that the range of VAT‑exempt services is essentially determined by this national concept and that simple facility rental – unlike what was assumed in earlier case law in some instances – is necessarily taxable.

In practice, the BFH decision requires charitable sports clubs to take a closer look at how their services are structured:

• Which elements of membership consist in participation in sporting events (with an additional organisational component), and which in mere use of facilities?
• From the perspective of the average member, is there a single overall supply by the club, or a bundle of separate supplies that must be assessed individually?
• To what extent do exemptions under section 4 no. 22(b) UStG come into play, potentially in combination with the reduced VAT rate under section 12(2) no. 8(a) UStG?
• Above all: which treatment of membership fees – following administrative practice or following the case law – is economically preferable in light of planned or ongoing investments?

For clubs with substantial investment projects, the new legal framework allows them, as a first step, to consciously opt for treating membership fees as taxable and subject to VAT in order to secure full input VAT deduction on investment‑related purchases and services. At the same time, clubs must bear in mind that a chosen VAT treatment can have consequences over many years due to the adjustment rules in section 15a UStG, and that any subsequent change of “model” requires careful planning.

The issues outlined are complex and highly dependent on the specific circumstances of each club. Whether, and to what extent, membership fees in a given club are taxable, subject to VAT or exempt, and how to structure a desired use of input VAT recovery in a legally robust way, will require detailed individual analysis.