Personal Budgets for Disabled and Dependent Individuals: A Win for Self-Determination, But What About Taxes?
The Federal Financial Court Grants Relief to Disabled and Care-Dependent Individuals through 'Personal Allocation' Plan - Court grants financial relief for disabled and caring individuals from "personal budget" requirements
Got a lump sum of cash, but no idea how to spend it? That's essentially what the personal budget is for disabled or care-dependent individuals. It's a bundle of social benefits, usually provided separately by various service providers, gathered together in one convenient sum to promote self-determination.
Recently, a company offering specialized services for those dealing with mental health issues, substance abuse, or intellectual disabilities in Hessen got into a tussle with the tax office over value-added tax (VAT) on their revenues from these services, paid for via personal budgets from the Hessian State Welfare Association.
The company argued that, in principle, VAT exemption for care and support services provided by a company is applicable if the services are at least 25% funded by health or social insurance funds—and since they're receiving money from the social service providers and the latter clearly specify the services the budget covers, they've indirectly met that requirement, according to the Munich ruling.
However, the tax court in Baden-Württemberg is yet to clarify whether the company only bills services financed by the social service providers.
When it comes to cross-border transactions or German tax regulations, VAT treatment for social services varies. The European Court of Justice (ECJ) has stated that VAT exemption for cross-border social services depends on the provider's recognition in their home country, not the location of the service provided.
In the context of German tax regulations, social services might be VAT-exempt if they meet specific criteria. However, the search results do not disclose the Federal Fiscal Court's specific decisions regarding VAT treatment for services provided using personal budgets in Hessen.
To get the straight dope on how VAT is treated for services provided to care-dependent individuals using personal budgets in Hessen, consult specific court decisions from the Federal Fiscal Court of Germany or relevant legal documents from that region, or better yet, chat with a tax professional versed in German tax law.
- The community institution providing mental health services is entangled in a dispute with the tax office regarding value-added tax (VAT) on their revenues, as these services are funded predominantly by personal budgets from the Hessian State Welfare Association.
- The health-and-wellness institution argues that their services should be exempt from VAT, as they meet the European Court of Justice's criteria for VAT exemption on cross-border social services, given their recognition in their home country.
- Businesses offering financial support for those with intellectual disabilities, substance abuse issues, or mental health problems may need to clarify whether they bill only services financed by social service providers to qualify for VAT exemption, particularly as per German tax regulations and decisions from the Federal Fiscal Court of Germany in Hessen.
