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Lawyer Prof. Dr. Dr. Karsten Fehn

14. November 2022

Taxation of human and dental #practices – trade tax trap for branch practices and fees from consultancy and #cooperation agreements

The tax authorities are currently “grinding the mills” more slowly in light of the #Corona pandemic, but they are grinding. For some time now, the tax authorities have been increasingly trying to subject medical and dental practices to #trade tax, which #ZMVZ and #MVZ GmbH’s are subject to anyway. Approaches for an activity that is no longer freelance and therefore subject to trade tax within the meaning of § 18 para. 1 no. 1 sentence 2, 6th and 7th alt. EStG can be:

  1. Operation of #branch practices with employed #dentists and #physicians, whereby the treatment of patients no longer takes place or can no longer take place personally or according to professional instructions by the practice owner.
  2. Furthermore, there is a risk of “infection” under trade tax law of the entire (sic!) – i.e. also the undisputed freelance – practice turnover through income from #consultancy agreements and #cooperation agreements, in which, for example (subject to professional law permissibility), advertising activities for #pharmaceutical and/or #medical device manufacturers, the sale of products, the consultation of a #commercially active company or similar (#trade) are agreed.

In addition to trade tax, there may also be a #sales tax liability. According to § 4 No. 14 lit. a) UStG, only sales from medical treatments that were achieved while practicing as a doctor or dentist are exempt from VAT. This only applies to measures where a therapeutic objective is the main focus (BFH, judgment of 07.07.2005, ref. V R 23/04, and of 20.01.2008, ref. XI R 53/06).

The relative limit of the harmlessness of commercial activity with regard to the trade tax liability (not the #VAT liability) is, according to the case law of the Federal Fiscal Court (judgments of 27.08.2014, ref. VIII R 16/11 and VIII R 41/11), 3% of the total net turnover of the practice, in absolute terms at EUR 24,500.00 p.a. This means that if the proportion of turnover subject to trade tax exceeds 24,500.00 euros in absolute terms, the entire #practice turnover must be taxed accordingly. In view of the #tax rate, the possibility of retroactive taxation and the levying of interest and late payment surcharges, additional tax claims can quickly threaten the existence of the practice.

For this reason, corresponding practice models and draft contracts should always be checked by a lawyer or tax consultant in good time, i.e. before conclusion or invoicing.