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Tax advice for doctors

Whether you're a general practitioner, dentist or veterinarian, many doctors want to open their own practice and become self-employed after completing their long training. But correctly taxing treatments and other services is an art in itself, and mistakes can be very expensive. Find a good tax advisor for doctors who is familiar with the field and can suggest a sensible solution for specific case studies. As an employed doctor, you don't have to worry about these questions, but a tax advisor will still be able to give you tips on which professional expenses you can claim as business expenses in order to reduce your personal tax burden.

How can a tax advisor be useful for doctors?

In medical professions, people often open their own treatment practice and take the step into self-employment. However, the economic, legal and tax fundamentals for this are rarely taught in studies and training, so that newcomers to the profession are often unsure how to deal with the taxation of sales and what pitfalls they face.

A tax advisor can not only explain to you which formalities need to be completed when setting up a practice and whether you need to register a business for your practice or whether you can work as a freelance doctor. Due to their business knowledge, they can also support you with cash and bookkeeping and take over personnel accounting for you.

If you are a doctor looking for a tax advisor, you value in-depth knowledge in the field of medical treatment, ideally in the exact field in which you work. It is particularly helpful if your tax advisor already has professional experience and has successfully supported other doctors and practice groups.

No trade tax for doctors: advantages as a freelancer

All medical treatment activities are classified as freelance work. This applies to doctors, dentists , physiotherapists and physical therapists, for example. As a freelancer, you do not have to register a business. In addition to easier bookkeeping, this status also offers you exemption from trade tax. If possible, you should therefore try to be recognized as a freelancer as a self-employed doctor or alternative practitioner.

In addition to the actual treatments, many doctors also carry out a number of other activities, some of which are considered commercial work. For example, the sale of medicines and medical devices falls under this category, provided that they are not directly related to the treatment of the patient. If you provide services for other doctors in a laboratory and do not just cover costs but also make a profit from them, this work is also considered commercial. In general, any activity that does not pursue a therapeutic goal must be considered commercial.

Freelancer or business – pitfall: group practice

In principle, you can carry out commercial and freelance activities alongside each other and keep your accounting strictly separate. In this way, for example, you would only have to register your business for the sale of medical items and only pay trade tax on the profits made from this, but not on your medical treatments.

However, caution is advised if there is an indissoluble connection between the activities; in such a case, all work would be treated as commercial. In group practices in particular, there is a risk of such collateral damage if another member of the practice also carries out commercial activities and the entire group practice is then classified as a business.

Exemption from VAT only applies to medical treatments

Similar questions to those regarding trade tax can also arise with regard to sales tax: in principle, all medical treatments in human medicine are exempt from sales tax; more details are regulated in Section 4 No. 4 of the Sales Tax Code. While medical treatments by, for example, a family doctor, dentist, physiotherapist or midwife are exempt from sales tax, veterinarians generally have to pay sales tax because they provide services in veterinary medicine and not human medicine.

Potential tax errors arise when selling prostheses or braces, which are explicitly excluded from tax exemption. Other work that a doctor performs but which is not directly related to medical treatment is also subject to sales tax, such as writing books and articles, teaching at universities and giving lectures, or renting out medical equipment.

Particular caution is required with treatments that, depending on your point of view, can also be seen as measures to improve well-being. Pure wellness offers do not count as medical treatment and are therefore subject to sales tax. Some services have a controversial tax status, such as teeth whitening. Under certain circumstances, purely aesthetic procedures can be classified as medical treatments if they can remedy other health problems (such as psychological ones). In order to avoid the risk of incorrect taxation, it is advisable to work with a tax advisor who specializes in the medical profession and is familiar with current court rulings so that he or she can provide you with competent advice.

Tax issues for veterinarians

Most veterinarians are also self-employed and therefore do not have to pay trade tax. However, unlike medical treatments for people, treatments of animals are not among the types of work that are exempt from sales tax. In principle, sales tax must therefore be paid on all examinations and procedures in a veterinary practice. As a freelancer, however, you can - like any human doctor - make use of actual taxation. This means that you only have to pay sales tax on services whose invoices have already been paid by your customers. This is an advantage over the estimated taxation for traders, who have to pay sales tax after the service has been provided, even if the customer has not yet paid for the order.

Cash payments are much more common in veterinary practices than with general practitioners and other human medical practitioners. Keeping a cash book is extremely important in order to prevent the tax office from suspecting tax evasion by embezzling cash payments. In the long term, it can also pay off to purchase an electronic cash register, which automatically records deposits and withdrawals in an electronic cash book. Please note, however, that not every model complies with current legal requirements. If you are unsure, we recommend speaking to a tax advisor for veterinarians, who can also advise you on accounting issues.

Taxes as an employed doctor

If you don't want to go to the trouble of running your own practice and are instead employed in a group practice or a hospital, many tax issues will not apply to you. However, you can get help from a tax advisor to reduce your tax burden. If you have no other income from self-employment, you can also clarify such questions with a tax assistance association. For example, you can deduct expenses for your work clothes and accessories from your taxes; not just for the purchase of a doctor's coat, but also for cleaning. Costs for training courses and business trips as well as specialist literature can also be claimed as business expenses.

Sources

1. https://www.gesetze-im-internet.de/ustg_1980/__4.html
2. https://www.falch-partner.de/steuerberater/gesundheitswesen-fachberater-muenchen/steuerberater-aerzte
3. https://www.arzt-wirtschaft.de/so-find-sie-den-rechte/
4. https://www.arzt-wirtschaft.de/steuerfrei-dienste-des-arztes-im- Grenzbereich/
5. https://www.wir-sind-tierarzt.de/2016/12/nicht-registrierkassenpflicht-fuer-tieraerzte/
6. https://www.arzt-wirtschaft.de/das-koennen-arbeiter-aerzte-von-der-steuer-abstellen/