Section 1: Subject matter and scope

§ 2b Legal entities governed by public law

(1) Subject to paragraph 4, legal entities governed by public law shall not be considered as taxable persons according to § 2 if they carry out activities that they are obliged to carry out in their role as public authorities, even where such transactions are subject to customs duties, fees, contributions or other duties. Sentence 1 shall not apply in the event that treatment as a non-taxable person would result in an increase in unfair competition.

(2) An increase in unfair competition shall not be given in particular where

1. the estimated turnover of a legal entity governed by public law for each activity of the same type is not expected to exceed EUR 17,500 within a calendar year, or

2. comparable supplies carried out on the basis of private law are VAT exempt without the right to waive the VAT exemption (§ 9).

(3) In the case where a supply is carried out for another body governed by public law, an increase in unfair competition shall not be given in particular where

1. legal provisions dictate that the supplies may only be carried out by legal entities governed by public law, or

2. cooperation takes place as a result of specific common public interests. This is generally the case when the supplies

   1. are based on long-term agreements under public law,

   2. serve to maintain public infrastructures and to exercise public tasks that all of the parties involved are obliged to carry out,

   3. are exclusively carried out in return for reimbursement of expenses, and

   4. are supplied by a party which primarily carries out supplies of the same type for other legal entities governed by public law.

(4) Even if the conditions of paragraph 1 sentence 1 are met, legal entities governed by public law are regarded as taxable persons if the other conditions set out in § 2 paragraph 1 are met when the following activities are being carried out: