It is not uncommon for vendors to offer insurance for the goods they’ve sold or rented out. Insurance is exempt from VAT. However, if insurance is regarded as ancillary to a taxed supply or lease, VAT may be due on insurance premiums as well.

On the other hand, if the insurance qualifies as a separate service, the vendor of both supplies could use the exemption for insurance as a “tax planning” instrument, e.g., by shifting (a part of ) the price or margin for the taxable supplies to the VAT-exempt insurance.

In the B.G.Ż. Leasing case, the European Court of Justice ("ECJ") was once again confronted with a preliminary question regarding the VAT treatment of a combination of services, or a so-called complex supply.

A combination of services may qualify as a single supply. The VAT treatment of such single/composite supply follows the VAT treatment of the principal service. If no principal service can be distinguished, the single/composite supply is considered to constitute a service sui generis. Either way, the services constituting the single/composite supply lose their individual VAT treatment. This could trigger a VAT advantage, for instance, if the single/composite supply is taxed at a lower VAT rate than its individual elements.

In the case at hand, B.G.Ż. Leasing leased out cars obliging its lessees to arrange for car insurance. Lessees could conclude insurance with B.G.Ż. Leasing, in which case B.G.Ż. Leasing concluded an insurance with an insurer and re-invoiced the cost to the lessee.

In order to establish the VAT treatment of the combined lease and insurance, the ECJ assessed whether the provision of insurance could, for VAT purposes, be qualified as ancillary to the lease of cars as principal service. If so, the provision of insurance would follow the VAT treatment of the lease of cars.


A service is regarded as ancillary to a principal service if it does not constitute for the customers an aim in itself, but a means of better enjoying the principal service supplied.

The EU VAT Directive does not clarify when a supply of goods or services qualifies as an ancillary provision. However, the ECJ provided some examples of circumstances indicating that a supply of goods or services is ancillary to the principal service.

Take, for instance, the invoicing and pricing of the combined supplies. A single invoice and price seems to indicate a single/composite supply. Also, the possibility to terminate the contract for one service in the event the fees for the other supply are not paid could also indicate a single/composite supply.


With regard to the assessment of the ECJ if the insurance in the case at hand would lead to a “better enjoyment” of the principal service, the ECJ concluded that any insurance transaction has, by nature, a link with the item it covers. It follows that there is necessarily a connection between the leased item and the relevant insurance. Nonetheless, such a connection is not sufficient in itself to determine whether or not there is a single/composite supply for VAT purposes.

Furthermore, the ECJ acknowledges that as a result of the insurance for the leased item, the risks faced by the lessee are normally reduced as compared with those incurred in a situation in which such insurance is lacking. it remains however the case that that derives from the very nature of the insurance. That, in itself, does not mean that such insurance must be regarded as being ancillary to the leasing service of which it forms part.

Although such insurance supplied to the lessee through the lessor facilitates the enjoyment of the leasing service, it must be held that it constitutes essentially an end in itself for the lessee and not only the means to enjoy that service under the best conditions.