Exemption from value-added tax liability for doctors and other healthcare professionals

In principle, companies with an annual turnover of more than 100,000 Fr. owe value-added tax. Exceptions are organizations from the fields of medicine, childcare, education, culture or sports. These also include the services of doctors and other similar medical and nursing professionals, provided they have a professional practice permit. The case of an osteopath reached the Federal Court.

Regardless of their legal form, companies that generate an annual turnover of more than 100,000 Fr. are subject to value-added tax. Organizations from the fields of medicine, childcare, education, culture, or sports are exempt. The tax-exempt services are listed in Art. 21 Para. 2 of the Value-Added Tax Act (MWSTG). Among others, according to No. 3 of this article "the medical treatments provided by doctors, dentists, psychotherapists, chiropractors, physiotherapists, naturopaths, midwives, nursing professionals, or similar medical and nursing professionals in the field of human medicine, as long as the service providers have a professional practice permit." On August 21, 2018, case 2C_476/2017 came before the Federal Court, in which it was disputed whether the treatments of a osteopath active in the Canton of Zurich were subject to value-added tax. The alternative medicine practitioner had the intercantonal diploma as an osteopath, issued by the Swiss Conference of Cantonal Health Directors (GDK) on June 30, 2012. On January 30, 2013, she was first granted by the Canton of Zurich the title of complementary medicine in independent activity. The Federal Tax Administration (ESTV) ruled that she was compulsorily taxable, as her revenues exceeded 100,000 Fr. and registered her in the value-added tax register. The osteopath challenged this, as she believed she offered a tax-exempt service as described in Art. 21 Para. 2 No. 3 MWSTG. Her complaint was dismissed by the Federal Administrative Court, which is why she took the case further to the Federal Court. In Lausanne, the osteopath ultimately obtained her rights. It was not disputed whether osteopaths fall under the term "similar medical and nursing professionals" in the sense of Art. 21 Para. 2 No. 3 MWSTG, but whether the taxable osteopath possessed the professional practice permit required in the same number. The Federal Administrative Court had assumed that the permission to use the title in complementary medicine of the Canton of Zurich was not a professional practice permit, but a permit for activity using a specific title. However, the Federal Court found that the independent activity as an osteopath in the Canton of Zurich is not subject to a permit requirement. However, the Health Act of the Canton of Zurich allows the extension of the permit requirement to professionals in the field of complementary medicine, provided they have a diploma issued by a nationwide professional association, which is recognized by the government council. Thus, there exists a cantonally regulated admission to the independent practice of the profession as an osteopath in the sense of Art. 21 Para. 2 No. 3 MWSTG, which is why the Federal Court decided to uphold the complaint and instruct the ESTV to reimburse the claimant the collected value-added tax amounts plus interest.

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