Business operation for medical practice
Facts
Various dentists joined together to form a group practice. The division of labor was such that one of the doctors was almost exclusively responsible for the administrative work, such as organization, administration and marketing, etc. The auditor noticed this. This came to the attention of the tax auditor, as the doctor in question only had a mini-share of approx. € 900.00 of the sales revenues of around € 3.5 million. The tax office did not consider the person of the senior partner in question to fulfill the characteristics of self-employed work as a physician. Because with a physician partnership each physician owes a most personal and individual work achievement at the patient. The latter requires that each physician must perform a substantial part of the medical services himself. Since this did not apply to the senior partner in question, the tax office classified the income of the entire physician partnership as commercial income.
Avoidance strategies
Ultimately, the commercial infection of a medical practice and thus the threat of trade tax can only be prevented by taking into account the requirement that all partners fulfill the characteristics for the exercise of a liberal profession. The court considered it harmless, for example, if a physician performs the respective preliminary examinations of patients in routine cases or determines the method of treatment or reserves the treatment of "problematic cases" for himself or delegates the provision of the actual medical treatment service to employed physicians. In any case, however, each shareholder (= physician) must participate in the "teamwork" in the typical medical treatment area by virtue of his or her personal professional qualifications. The court regarded as a harmful division of labor - as in the case in dispute - the fact that a physician takes on almost only commercial management or other management tasks. This is then not freelance, but commercially active. He thus infects the entire partnership company, which becomes a commercial enterprise (the relevant legal basis is Section 15 (3) No. 1 of the German Income Tax Act/EStG).
Revision
An appeal against this ruling is pending before the German Federal Fiscal Court (file no. at the BFH: VIII R 4/22). Affected physician partnership companies can refer to these proceedings in similar cases of commercial infection.
Status: August 29, 2022
Image: Robert Kneschke - stock.adobe.com
