Financial lease contracts where a right to purchase for a nominal purchase price is agreed at the end of the contract, are in principle from 1 January 2025, treated for VAT purposes as supplies of goods. Output VAT on the entire leasing contract will therefore apply when the goods is transferred to the lessee.
However, after 1 January 2025, there will still be financial lease contracts for which the VAT regime will remain unchanged (supply of service). These will be contracts where the lessee has another option to terminate the contractual conditions.
For contracts concluded prior to 31 December 2024, financial lease contracts were mostly treated as supply of service with monthly VAT liability and monthly right of VAT deduction.
In addition, the treatment for leaseback contracts has changed; lease back contracts are considered financial service exempt from VAT.
In practice, it will therefore be necessary to examine the specific contractual terms in detail in order to apply the correct VAT treatment.
If you have any questions or uncertainties, please do not hesitate to contact our tax advisors.
