Federal Fiscal Court ruling: Trade tax exemption for team-based outpatient care

Trade tax exemption where care services are billed indirectly

Under section 3 no. 20 (d) of the Trade Tax Act, facilities for the outpatient care of sick persons and persons in need of care are exempt from trade tax if, in the relevant assessment period, the costs of care in at least 40% of cases are borne wholly or predominantly by the statutory social insurance or social assistance bodies. The provision does not grant a personal exemption to the enterprise as a whole. Rather, it benefits the care activity actually carried out. If the same legal entity also generates income outside the privileged facility, that income generally remains subject to trade tax. The decisive criterion is therefore an activity-based delineation (Federal Fiscal Court judgement of 8 May 2025, file ref. IV R 40/22, Federal Tax Gazette [Bundessteuerblatt–BStBl.] II 2025, p. 603, para. 50; Federal Fiscal Court judgement of 22 Jun 2011, file ref. I R 59/10, para. 13).

For example, the Federal Fiscal Court likewise does not regard the exemption under section 3 no. 20 of the Trade Tax Act for hospitals and retirement homes, among others, as an “unlimited personal tax exemption. The operator of the facilities specified in section 3 no. 20 (c) of the Trade Tax Act 2002 is not exempted from trade tax with its entire trade income; rather, only the income resulting from the operation of the facility benefits from the exemption. To the extent that the operator of the facility generates income outside the facility, that income is subject to trade tax” (Federal Fiscal Court decision of 10 Mar 2010, file ref. I R 41/09, Federal Tax Gazette II 2011, p. 181). Accordingly, the trade tax exemption is not “guaranteed” for distributions from such a company (Berlin-Brandenburg Fiscal Court [Finanzgericht–FG] judgement of 9 Apr 2025, file ref. 17 K 17002/24).

In the case at issue, a limited liability company [GmbH] operated an outpatient care service focusing on specialised outpatient palliative care [spezialisierte ambulante Palliativversorgung–SAPV]. It received some of its care assignments directly from the persons in need of care and billed these services to the health insurance funds itself. For the most part, however, it worked as a member of a “Palliative Care Team” organised as a cooperative. The GmbH provided the care directly to the persons in need of care using its own staff, but invoiced its services to the cooperative. It was only the cooperative that billed the team’s SAPV services as a whole to the health insurance funds. The services arranged in this way accounted for around 80% to 85% of the GmbH’s total income in the years 2015 to 2018. It was undisputed that the relevant costs of care were ultimately borne by statutory social insurance or social assistance bodies in at least 40% of cases.

The tax authorities were only willing to grant the trade tax exemption under section 3 no. 20 (d) of the Trade Tax Act for the services billed directly to the health insurance funds. In their view, the services billed via the cooperative had been rendered to a third party under civil law. The Düsseldorf Fiscal Court disagreed (Düsseldorf Fiscal Court judgement of 13 Mar 2024, file ref. 7 K 2517/21 G). The seventh chamber of the Federal Fiscal Court upheld the lower court’s ruling by way of a decision under section 126a of the Code of Procedure of Fiscal Courts [Finanzgerichtsordnung–FGO].

Actual care activity takes precedence over the billing route

In determining the scope of the tax exemption under section 3 no. 20 (d) of the Trade Tax Act, the Federal Fiscal Court relies on three core propositions:

• Activity-based approach: The exemption covers the income derived from the outpatient care actually provided. In the case at issue, the GmbH had rendered all of its care services directly to persons in need of care, using its own staff. The cooperative was therefore not the recipient of the care services, even though it was the contractual partner and, internally, the paying agent.
• Civil-law service relationships are not decisive: Under section 3 no. 20 (d) of the Trade Tax Act, it is not necessary for the person in need of care personally to be the client or for the care service to bill the body bearing the costs directly. What matters is the subject matter of the remunerated activity. The position would be different in the case of a mere provision of staff or other independent services to a third party. However, no such services were provided in the case at hand.
• Economic bearing of costs suffices: For the 40% threshold, too, the law does not require direct payment to the care facility. The term “borne” refers to the economic burden on the social insurance or social assistance body, not to the payment route. It is therefore sufficient for the third party to recharge the costs of care to the body bearing the costs and to pass the remuneration on internally to the party actually providing the care.

In the view of the Federal Fiscal Court, this interpretation is consistent with the purpose of the exemption. “Palliative Care Teams” based on a division of labour enable smaller care services in particular to participate in complex SAPV structures. If the exemption were lost merely because coordination and billing are pooled in the hands of a team operator, this would undermine the area-wide provision of care promoted by social law. The right of insured persons to opt for reimbursement of costs under section 13(2) of the Social Code Book V [Sozialgesetzbuch Fünftes Buch–SGB V] also shows that the tax exemption cannot depend on a particular payment route.

Billing via third parties: practical implications

The decision creates legal certainty for outpatient care services operating within collaborative care models. The interposition of a team operator, a cooperative or another coordinating body is not detrimental in itself. However, it remains a prerequisite that the taxpayer actually provides the qualifying care services itself. Where administrative, brokerage, staff provision or other commercial services are also rendered, the income from them must be assessed separately and, where appropriate, distinguished from the qualifying care income.

Documentation of the 40% threshold is of particular importance. In the case of multi-tier billing, verification is admittedly more onerous for the tax authorities. However, the Federal Fiscal Court does not see this as an obstacle, since the taxpayer bears the burden of proof. Care facilities should therefore be able to demonstrate in a verifiable manner, for each assessment period, in which cases and to what extent the costs of care were ultimately borne in economic terms by statutory social insurance or social assistance bodies. Reconciled billing records, proof of services rendered and contractual obligations on the interposed billing partner to provide information or evidence are advisable.

For tax structuring purposes, it follows that contracts and invoicing routes remain relevant, but they do not on their own determine the scope of the exemption. The focus is on the service actually rendered to the person in need of care, the allocation of the resulting income to the care facility and the economic bearing of the costs. Where mixed activities are carried on, a robust separation should already be made in the accounting records.

Beyond SAPV, the decision (section 126a of the Code of Procedure of Fiscal Courts) is significant for other models of outpatient care based on a division of labour. However, it does not amount to a general look-through of every service or billing chain. Only income from the privileged activity carried on by the taxpayer itself is exempt from tax. The decision should therefore be taken as an opportunity to review existing cooperation and billing structures as well as the documentation evidencing the bearing of costs.