Current news on the tax exemption of aesthetic treatments

The case concerned a surgeon who runs a practice specialising in treating hair loss (alopecia). For the years in question, he declared ninety percent of his revenue as tax-free because – in his opinion - it was for medical care as defined by Section 4 no. 14(a) of the German VAT Act (Umsatzsteuergesetz – UStG). During a tax audit, the tax auditor held the view that only hair transplants for scarring hair loss should be tax free because only they could be considered a medical condition under Section 27(1) no.1 of the Social Code Volume V (Sozialgesetzbuch V) and the other revenue should be taxable.  When this was set down in the tax assessment, the surgeon then appealed against this, without success. The fiscal court, however, merely classified his diagnostic work as tax-free. The surgeon then turned to the appeals court. 

BFH judgment – hair transplants can be for therapeutic purposes

The Federal Fiscal Court decided that the appeal was justified. Although the fiscal court decided correctly that the claimant’s diagnosis work was tax-exempt, it then incorrectly made a blanket rejection of hair transplants as having a therapeutic purpose.  The fiscal court did not adequately examine to what extent the various forms of hair loss were a medical condition requiring treatment. The Federal Fiscal Court also distinguished which services fall under the term “medical treatment” and came to the conclusion that hair transplants can have a therapeutic purpose. The tax office had previously rejected this because it didn’t consider the treatments would either cure or treat the cause of the hair loss. In its judgment, the Federal Fiscal Court has taken a different view and expanded the scope. According to this, they can still have a therapeutic purpose even if they don’t have an effect on the cause, especially when defects related to the cause can be compensated for. 

Not every case constitutes medical treatment

But the Federal Fiscal Court does not consider every case of hairloss-treatment to be medical treatment. If aesthetic treatments can be classified as tax-exempt depends very much on the circumstances of the case in question. It is not determined by the patient’s subjective concept. The medical assessment has to be carried out by specialists. The doctor providing the treatment may not make this assessment themselves, even if he or she is included among the specialists. Otherwise, the doctor, as the service provider, would be able to determine themselves how to prove that the conditions were fulfilled without the tax office or fiscal court being able to review it.  For this medical assessment, the Federal Fiscal Court requires a doctor’s certificate that in particular must include information on what actual basis the specialist assessment was carried out and what methods were used to record the facts.

According to the Federal Fiscal Court, hair loss is a condition requiring treatment if the loss or lack of hair is already a medical condition in itself, has an objectively disfiguring effect or results in further complications. The simple fact that the hair is no longer available as a natural protection against the sun, heat and cold, is not sufficient in itself to be considered as requiring treatment. 

Practical relevance – the judgment also applies to other treatments 

By using the phrase “like hair transplants” concerning aesthetic treatments, the Federal Fiscal Court apparently wants to signal that this judgment is not only applicable to services in the form of hair transplants. Rather, the court only using this as an example for different aesthetic treatments. The Federal Fiscal Court’s principles for distinguishing medical treatments from purely aesthetic ones should therefore extend beyond the individual case. Our experts will be glad to support you in classifying your medical services for tax, including tax years that are still open.