Germany: “Leasing” of virtual land in online game not subject to VAT; other VAT developments

German Federal Tax Court held that in-game “leasing” of virtual land in an online game is not subject to VAT

In-game “leasing” of virtual land in an online game is not subject to VAT

The German Federal Tax Court (BFH) held (18 November 2021, V R 38/19) that the in-game “leasing” of virtual land in an online game is not subject to value added tax (VAT).

The court concluded that “transactions” effected solely through the participation in a game as part of the events of the game do not regularly give rise to a taxable supply. The court reasoned that in-game “transactions” between people who restrict themselves to mere participation in the game, and thus to interactions with other participants in order to create their gaming experience, do not as a rule constitute participation in the real economic world.

Conversely, the court determined that as a matter of contractual law, the exchange of a game currency into legal tender (in the case under dispute via an exchange administered by the operator of the game) gives rise to a supply subject to VAT. The place of the notional supply is governed by the place where the game operator runs its company, which was determined to be the United States where the game operator also was resident.

Read an April 2022 report [PDF 300 KB] prepared by the KPMG member firm in Germany

Other recent VAT developments that may affect businesses in Germany include the following items:

  • On the term fixed establishment (CJEU, ruling of 7 April 2022 – case C-333/20 – Berlin Chemie A. Menarin)
  • Recipient of a supply in the case of the transfer of half of a joint property (BFH, ruling of 25 November 2021, V R 44/20)
  • Business characteristic of supervisory board members (BMF, guidance of 29 March 2022 – III C 2 - S 7104/19/10001 :005)
  • Input VAT deduction of a shareholder from investment transactions (BMF, guidance of 12 April 2022 – ref. III C 2 - S-7300 / 20 / 10001 :005)


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