Insights
VAT
Medical Centre: Rental or Comprehensive Service Package?
Anyone wishing to practise as a doctor in a medical centre may, in certain cases, choose between using the premises on the basis of a rental agreement or taking a full service package. The distinction has VAT consequences.
Depending on how the contractual relationship is structured, the medical centre must either invoice the doctor with VAT – or not. The use of a medical centre can on the one hand take place within the framework of a pure rental of premises that is VAT‑exempt. An option for VAT liability would be possible for the landlord (the medical centre) only if its tenant is an entrepreneur who uses the rented object for more than 95% for VAT‑liable supplies. This is usually not the case for the doctor, as the doctor generally carries out VAT‑exempt activities.
Therefore, the landlord (the medical centre) can in most cases not opt for VAT on the rental of consulting rooms and thus also cannot deduct input tax on the construction or purchase of the building. For the doctor this means that his rent contains no VAT. Whether the landlord (the medical centre) can pass on any potential “input‑tax loss” (due to the inability to deduct input tax) to the doctor depends on the contractual arrangement.
Package of Services
On the other hand, the medical centre can offer, in addition to the premises, a package of services such as cleaning, telephone service with appointment management, reception desk, accounting, procurement, stock management, mail administration, marketing, etc. The doctor does not have to deal with any organisational matters and can concentrate solely on the medical treatment of his patients. The individual doctor is not provided with a specific individual room over which he can exclusively act as a tenant. Rather, the medical centre’s services consist of a package of services.
The inevitable use of the medical centre’s existing premises by the doctor therefore represents a subordinate ancillary service in relation to the overall services provided. Consequently, the rental of land in the narrow sense recedes tax‑wise, so that the VAT exemption applicable to land rental does not apply.
In the result, the medical centre provides the individual doctor not a VAT‑exempt land service but a VAT‑liable other service in total and is simultaneously entitled to full input‑tax deduction. For the individual doctor, the cost of using the medical centre therefore increases by the charged VAT, which he cannot reclaim as input tax himself.
Note
When using medical centres it matters whether it is a pure rental of defined premises that only the respective doctor can use, or whether a comprehensive service package is offered. This can lead to major differences in the VAT assessment. A clear contractual arrangement and early tax advice are therefore essential to avoid unexpected tax burdens.
Therefore, the landlord (the medical centre) can in most cases not opt for VAT on the rental of consulting rooms and thus also cannot deduct input tax on the construction or purchase of the building. For the doctor this means that his rent contains no VAT. Whether the landlord (the medical centre) can pass on any potential “input‑tax loss” (due to the inability to deduct input tax) to the doctor depends on the contractual arrangement.
Package of Services
On the other hand, the medical centre can offer, in addition to the premises, a package of services such as cleaning, telephone service with appointment management, reception desk, accounting, procurement, stock management, mail administration, marketing, etc. The doctor does not have to deal with any organisational matters and can concentrate solely on the medical treatment of his patients. The individual doctor is not provided with a specific individual room over which he can exclusively act as a tenant. Rather, the medical centre’s services consist of a package of services.
The inevitable use of the medical centre’s existing premises by the doctor therefore represents a subordinate ancillary service in relation to the overall services provided. Consequently, the rental of land in the narrow sense recedes tax‑wise, so that the VAT exemption applicable to land rental does not apply.
In the result, the medical centre provides the individual doctor not a VAT‑exempt land service but a VAT‑liable other service in total and is simultaneously entitled to full input‑tax deduction. For the individual doctor, the cost of using the medical centre therefore increases by the charged VAT, which he cannot reclaim as input tax himself.
Note
When using medical centres it matters whether it is a pure rental of defined premises that only the respective doctor can use, or whether a comprehensive service package is offered. This can lead to major differences in the VAT assessment. A clear contractual arrangement and early tax advice are therefore essential to avoid unexpected tax burdens.